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bank discOunt

Promissory note of the Bank is a bond, which can be presented for payment till due, which provides maintenance of current liquidity.

Promissory note of the Bank is a reliable support at getting credits and guarantees.

The other advantages of Promissory note of CB "FAMILY" Ltd. include simplicity and rapidity of operation processing, and also, due to the flexible interest policy of the Bank, the possibility of the Customer to choose most convenient sum and terms conditions of cash resources allocation

Bank discounts are an example of a bank charge that is made for payment of a note at some point prior to maturation. In some cases, the bank discount is applied at the time that the note or loan is extended, and is automatically deducted from the loan amount that is used to calculate the schedule of payments on the loan. This in effect means that the receiver of the loan simply repays the face value of the loan, and little or no interest.

Generally, banking institutions require compliance with a rigid set of qualifications in order for an individual or business to obtain a bank discount. One of the more common requirements for a bank discount is a solid record of previous financing with the institution. Prior repayment of loans that took place within the terms of the loan certainly influence consideration for the extension of a bank discount. If the past loan history shows no late payments and no complications with the loans, then the chances for receiving a bank discount are greatly improved.

The level of bank credit is also a factor as well. From this perspective, the eligibility for receiving a bank discount is impacted by the current assets and liabilities of the borrower. If there is a high credit rating and it is easy to demonstrate that there is a healthy difference between assets held and outstanding balances owed, the chances for obtaining a bank discount are enhanced a great deal.

The underlying purpose of a bank discount is to reward individuals and businesses for practicing excellent financial management. Because these types of customers are considered to be such good credit risks, the bank can afford to extend a bank discount, with the expectation of being able to do business with the borrower in future projects. Along with the ongoing business relationship, there is also the good word of mouth that is generated for the bank. Happy customers tend to promote the bank to acquaintances, which may also help the bank to indirectly build a larger base of depositors and customers.

Of course, it is important to note that a bank discount can be revoked. This could happen during the course of the loan. Should the borrower fail to make a payment, or becomes unable to continue to make payments, then there is a good chance that the bank discount would be applied to the remaining balance. From this perspective, borrowers want to continue to make payments in a timely manner for the duration of the loan, in order to maintain the bank discount.


It is common for lBank Discount:

1) Bank discount (D)

2) Maturity value of loan (S)

3) Discount rate (d)

4) Time (t)

5) D = Sdt


A. Formula for bank discount: D = Sdt
1. Solve for D
2. Solve for S, d or t
B. Formula for proceeds: P = S - D

S=P/(1-dt)
C. Formula for maturity value:
D. Conversion of discount rate to interest rate and vice versa:
r=d/(1-dt)
E. Value of a promissory note at any point in time.

If Siti needs RM4000 now, how much should he borrow from his bank for 1.5 years at a 12% bank discount rate?

P= RM4000
d= 12%
t= 1.5years

P =S(1-dt),
4000=S(1-0.12x1.5)
S=4000/(1-0.12x1.5)

Siti should borrow RM4878.05 to get RM4000 as Proceeds.

compOuND InTEReSt fOrmula..

ORIGINAL PRINCIPAL= P
PERIODIC INTEREST RATE= i
NUMBER OF INTEREST PERIODS IN THE INVESTMENT PERIOD= n
FUTURE VALUE after n interest periods= S

When you place an initial amount P into an account, it is called the principal. In a compound interest account the following happens. The money in your account grows to an amount S after n periods. (The number n here identifies the number of periods your money stays in the account without any withdrawals, or deposits, except for interest payments at the end of each period.) The amount S is given by the compound interest formula

Start Investing Early and Compound Interest Will Work Hard for you
Start investing early and often. Time is a dimension that we have zero control over. You can start off by investing $20 a month when you’re 20, and will end up with more money than someone who started investing $100 a month when they’re 30. Money can be replicated, but time is irreplaceable.

Small amounts count. When I learned this equation in school, I believed the magic of compound interest only applied to large sums of money. I was wrong. $1 will compound as much as $100, provided that annual returns are equivalent. If you have $20 left over from your monthly budget, then re-invest the money so you can earn more money later.


S = P(1+i)n

In this formula, the interest rate per period is given by the quantity i. The formula should only be used when interest is compounded. Again, compounded means the interest is reinvested at the end of each period with no other deposits or withdrawals, Each interest payment deposited in your account then earns interest (rent from the bank) in the following periods.

Step1. Learn what compound interest is. Compound interest is interest paid on the principal loan or investment sum combined with interest on any outstanding interest incurred.
Step2. Gather some basic facts about the loan or investment you want to calculate compound interest for. You will need to know the principle amount you started with, the yearly rate of interest paid and the number of years you want to calculate the interest.
Step3. Use the formula S = P(1+i)^n where "S" equals the final result, "P" is the principle, "i" is the yearly interest rate and "n" is the number of years you want to figure the interest for.
Step4. Start by working the part of the formula in parenthesis. Add 1 to the yearly interest rate. Then, take that number to the power equal to the number of years you want to calculate the interest for. The power is calculated by taking the number times itself. For example, if you are figuring the interest over a 5 year period, you take the number times itself five times.
Step5. Take the result of the number in parenthesis and multiply it by the principle. The result is how much money will result from compound interest over the period of years you specified.
Step6. Try an example. To figure out how much money you will have in 5 years if you invest RM10,000 in a savings account that pays 3% interest, the formula would be S= 10,000(1 + .03)^5. 1 + .03 is 1.03 and 1.03 times itself 5 times is 1.1592. 10,000 times 1.1592 equals 11,592. So, after 5 years at 3% interest, RM10,000 becomes RM11,592.

4 basic conCeptS

Four basic conCeptS in simple inTerest

*Exact time- it is the exact number of days between 2 given dates.
*Approximate time- it assumes a month has 30days in the calculation of number of days between 2 given dates.
*Ordinary simple interest- in calculating ordinary simple interest, we use a 360-day year.
*Exact simple interest- this uses a 365/366-day year for interest computation.
RM 1500 was invested on 15 March 2008. If the simple interest rate offered was 10% per annum, find the interest received on 29 August 2008
Concept used Interest calculations
(a) Exact time and exact simple interest
I= 1500x0.1x167/365
=RM 68.63
(b) Exact time and ordinary simple interest I= 1500x0.1x167/360
= RM 69.58
(c) Approximate time and exact simple interest I= 1500x0.1x164/365
= RM 67.40
(d) Approximate time and ordinary simple interest I= 1500x0.1x164/360
= RM 68.33


Banker’s rule- method (b) is called Banker’s rule. In Malaysia, calculation of interest is governed by a banking rule which states that the 365-day year must be used.

traDe and caSh discOunts..

What is a Trade Discount?

A "trade discount" is also known as a distributor discount and is the percentage off your retail price that you offer to the publishing trade for distributing your book. The "publishing trade" consists of wholesalers, distributors, and retailers. Everyone who handles your book takes a piece of the trade discount.

Obviously, the larger the trade discount, the more money there is to split up among the parties involved. Standard trade discounts range from 50% - 70%.

Discounts and Allowances are reductions to the selling price of goods or services. They can be applied anywhere in the distribution channel between the manufacturer, middlemen (such as distributors, wholesalers, or retailers), and retail customer. Typically, they are used to promote sales, reduce inventory, and reward or encourage behaviors that benefit the issuer of the discount or allowance.

Trade Discount= List price-net price
Amount Trade Discount= List pricex Trade Discount rate

**3 bears..just manage bought it in lovely lace, klcc
The list price of a bear is RM29.90. A trade discount of 20% is offered.

NET PRICE
LP=RM29.90
Td=20%x29.90
=RM5.98
Net Price= LP-Td
=RM 29.90-5.98
=RM23.92(3bears)
=RM71.76

AN ALTERNATIVE METHOD, FORMULA FOR CALCULATING nEt PricE.
NP=L(1-r)
NP=net price
LP=List Price
r%=Trade discount
From net price= list price-trade discount
NP=L-Lr
NP=L(1-r)
NP=29.9(1-20%)
=RM23.92(3)
=RM71.76

COMPOUND INTEREST..

Compound interest is interest calculated on the principal amount invested, which is then added to the principal amount, and compounded again. Compound interest can be earned daily, weekly, monthly or yearly. Generally the more times an amount is compounded, the more money you can make.

As long as you leave an interest earning account alone, by not removing money from it, you begin making more money on your investment (given a stable interest rate) because the money you earn is added back to the principle amount. It’s a simple fact that more money earning interest makes you more money. Each time interest is compounded, the money earned gets added to the total.

If you were raising two rabbits, you might view a similar thing. If the bunnies produced a litter, and you kept all those bunnies, then you might have possibly eight rabbits. The original bunnies would keep on breeding, as would the new litter, and you’d end up with more rabbits then you knew what to do with. Compound interest won’t be quite that dramatic, unless you’re investing huge sums of money. The important parallel is that the first pair of bunnies (your original investment) and their offspring (interest) now combine together to produce yet more bunnies, and as combined, they will produce a great deal more than if they were sold off and separated.

Most investment firms, banks, and the like, will state how often your interest is compounded. In some cases, your investment doesn’t compound, but earns what is called simple interest. This means you only make money on the amount you initially invested, and the profits are not reinvested to make you more money.

You can figure out exactly how much an investment will be worth in a few years if you have a scientific calculator handy. You also need to know the initial investment amount (principal or p), the rate of interest, (r), the number of years you plan to allow the investment to sit (years or y) and the number of times per year you investment will compound (t). Recall that only a portion of the interest would be earned each month, so the interest amount would have to be divided by the total times interest gets compounded each year (t). The formula is as follows:

Total value = p(1 + r/t)ty

Putting this to work, in dollar amounts, you might invest RM10,000 in a savings account that earns 5% interest per year and is compounded monthly. If you leave that money alone for five years, you could figure out exactly how much money you’d make in that time period, and the value of your account at the end of four years. The equation would look like this:

10,000(1 + .05/12)12 X 5 = RM12,833.59

If you only earned simple interest, at even 5.5% per year, you wouldn’t make that much money. Note the following:

10,000(1 + .055 X 5) = RM12,750.00


One reason to understand compound interest is because some accounts that earn simple interest offer a higher yearly interest rate. Yet if your investment is long term, you may make more money with a lower interest rate that compounds your interest. On the other hand, if you know you’ll be removing the money after a year or two, a higher interest rate that is not compounded may be a better investment, than an account with compound interest at a lower rate. Also, don’t be daunted by these formulas if you are calculating interest. If you have access to the Internet, you can find hundreds of sites that offer compound interest calculators and most of them are very easy to use.


Today, calculators will do the computational work for you, however, here's a breakdown of how to calculate compound interest:
Compound interest is interest that is paid on both the principal and also on any interest from past years. It’s often used when someone reinvests any interest they gained back into the original investment. For example, if I got 15% interest on my RM1000 investment, the first year and I reinvested the money back into the original investment, then in the second year, I would get 15% interest on $1000 and the RM150 I reinvested. Over time, compound interest will make much more money than simple interest. The formula used to calculate compound interest is:

M = P( 1 + i )n

M is the final amount including the principal.

P is the principal amount.
i is the rate of interest per year.
n is the number of years invested.

Applying the Formula

Let's say that I have RM1000.00 to invest for 3 years at rate of 5% compound interest.

M = 1000 (1 + 0.05)3 = RM1157.62.

You can see that my RM1000.00 is worth RM1157.62.

sample of SIMPle interest..

Ray just got a full-time job and wants to start saving money so he can raise a family. His brother Bart's advice to Ray was to open a savings account so it can accumulate interest.

Beth does not have enough money to pay for college. She will have to take out student loans from the government. As long as she qualifies, there is no limit to how much she can borrow, but she will have to pay back the loans with interest when she graduates.


Both Beth and Ray’s situations deal with interest.
Interest formulas can be quite complicated and difficult to understand. Interest plays a major role in our everyday lives. The simple interest formula is a basic formula that we can use to study interest.


Three things are needed to calculate simple interest:

Principle = the amount put into the bank or
the amount borrowed from the bank

Rate = the percent

Time = how many years the money is in the savings account at the bank or how many years it will take you to pay back the loan.


The formula for calculating interest is very simple:


Simple Interest = Principle x Rate x Time(in years)


The tricky part about calculating the interest is the time aspect. The time must be in years. If the time is given in months, simply divide your months by 12. This is because there are 12 months in a year.


Example: Ray put RM1,000 into a savings account. The interest on the account is 3.5%. He wants to put the money away for 18 months.
How much will Ray have at the end of that time period?
I = p x r x t
I = $1,000 x 3.5% x 18
I = RM1,000 x 0.035 x 18
(change the percent to a decimal)
I = RM1,000 x 0.035 x 1.5
(divide the number of months by 12)
I = RM52.50
Adding the interest back on to the principle, Ray now has RM1,052.50



Beth does not have enough money to pay for college. She will have to take out student loans from the government. As long as she qualifies, there is no limit to how much she can borrow, but she will have to pay back the loans with interest when she graduates.


Beth owes RM38,000 in student loans. The interest rate on her loans is 8.25%. She will be paying these loans off for 20 years. How much will Beth pay altogetherI = px r x t
I = RM38,000 x 8.25% x 20
I = RM38,000 x .0825 x 20
(change the percent to a decimal)
I = RM62,700
Adding the interest back on to the principle, Beth has to pay RM100,700.



Luckily for Beth, the president is attempting to pass a law stating the interest on student loan payments cannot exceed 7%.