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Simple Discount: Solution

A simple discount is interest deducted in advance from the final amount or maturity value of a loan. The document provides the formula for simple discount as D = Fdt, where D is the discount amount, F is the final value, d is the discount rate, and t is the time period. It also provides formulas to calculate the time period or discount rate given other known values. Several examples are provided to demonstrate calculating simple discounts, proceeds, maturity values, and time periods using the formulas.

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7K views

Simple Discount: Solution

A simple discount is interest deducted in advance from the final amount or maturity value of a loan. The document provides the formula for simple discount as D = Fdt, where D is the discount amount, F is the final value, d is the discount rate, and t is the time period. It also provides formulas to calculate the time period or discount rate given other known values. Several examples are provided to demonstrate calculating simple discounts, proceeds, maturity values, and time periods using the formulas.

Uploaded by

dreamfever0323
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SIMPLE DISCOUNT

A simple discount (D) is an interest collected or deducted in advance from the final
amount or maturity value.

Formula: 𝑫 = 𝑭𝒅𝒕

where: F = final amount or maturity value


d = discount rate
t = time/term

The amount that is left after the interest is deducted is called proceeds.
𝑃 =𝐹 −𝐷
𝑃 = 𝐹 − 𝐹𝑑𝑡
𝑷 = 𝑭(𝟏 − 𝒅𝒕)

Other Formula:
𝐷
discount rate 𝑑= 𝐹𝑡

𝐷
time 𝑡= 𝐹𝑑

Example:

1. Determine the interest to be deducted in advance if ₱ 20 000 is due after 8


months with a discount rate of 12%.
Given: F = ₱ 20 000
d = 12% = 0.12
8
t = 8 months = 12

Solution: D = Fdt
8
D = ( ₱ 20 000 ) ( 0.12 ) ( 12 )
𝐃 = ₱ 1 600
2. Determine the interest in advance to be deducted for a loan worth ₱ 50 000
due after 1 year and 3 months with a discount rate of 15%. How much will be
the proceeds?

Given: F = ₱ 50 000
d = 15% = 0.15
3 15
t = 1 year & 3 months = 1 12 = 12

Solution: D = Fdt
15
D = ( ₱ 50 000 ) ( 0.15 ) ( 12 )
𝐃 = ₱ 9 375
P=F −D
P = ₱ 50 000 – 9 375
𝐏 = ₱ 40 625
Other solution:
P = F (1 − dt)
15
P = ₱ 50 000 [ 1 – (0.15) (12) ]

𝐏 = ₱ 40 625
D =F −P
D = ₱ 50 000 – 40 625
𝐃 = ₱ 9 375

3. What is the simple discount rate if the proceed is ₱ 85 000 from a loan of
₱ 100 000 payable in 3 years?
Given: F = ₱ 100 000
P = ₱ 85 000
t = 3 years

Solution: D = F − P
D = ₱ 100 000 – ₱ 85 000
𝐃 = ₱ 15 000
D
d= Ft

₱ 15 000
d = ( ₱ 100 000 )( 3 )

𝐝 = 0.05 = 5%

4. How long will it take for ₱ 50 000 to amount to ₱ 72 500 if the discount rate is
6%?
Given: F = ₱ 72 500
P = ₱ 50 000
d = 6% = 0.06

Solution: D = F − P
D = ₱ 72 500 – ₱ 50 000
𝐃 = ₱ 22 500
D
t= Fd

₱ 22 500
t = ( ₱ 72 500 )( 0.06 )

t = 5.17241… years
𝐭 = 5 years, 2 months, 2 days

5. The proceeds of a 2 year loan is ₱120 000. If the discount rate is 12%, how
much is the maturity value?
Given: P = ₱ 120 000
d = 12% = 0.12
t=2
P
Solution: F= 1 − dt

₱ 120 000
F= 1−(0.12)(2)

𝐅 = ₱ 157 894.74

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