88. Bank discount and proceeds

The lesson, step by step

1. Warm-up

   Ask: If a bank lends you money and takes its interest at the start, do you get the full amount in your hand?

2. The idea

   Read:

   Bank Discount is simple interest on the face of a note, calculated from the day of discount to the day of maturity, and paid in advance.

   The Proceeds of a note is the amount which remains after deducting the discount from the face.

3. Bank discount is bigger

   The book explains that bank discount is a little more than true discount, because it is interest on the face, not on the present worth. Say: That difference was the bank's extra profit.

4. Work the book's example

   A note of $770 for 90 days at 6%. With 3 days of grace the bank charges 93 days. $1 for 93 days at 6% is $.0155. Discount = $770 × .0155 = $11.935. Proceeds = $758.065.

5. The rule

   Read:

   Find the interest on the sum discounted for three days more than the given time, at the given rate; it is the discount.

   Subtract the discount from the sum discounted, and the remainder is the proceeds.

6. Practice notes

   Read the instruction:

   Find the day of maturity, the time to run, and the proceeds of the following notes:

   For each note: 1) add the months or days, plus 3 days of grace; 2) count days from the day of discount to that day; 3) find the discount and proceeds. Do the first together, then let your student try the next ones.

7. Check and wrap-up

   Compare with the printed answers. The book writes the due dates as "Nov. 26/29": the first is when the note says it is due, the second is the legal date with grace.