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5.2 SIMPLE DISCOUNT

5.2 SIMPLE DISCOUNT. Simple discount is also known as bank discount. Bank discount is the amount that the bank deducts from a loan in advance. objectives. At the end of this topic, students should be able to: Find the simple discount and proceed

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5.2 SIMPLE DISCOUNT

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  1. 5.2 SIMPLE DISCOUNT Simple discount is also known as bank discount. Bank discount is the amount that the bank deducts from a loan in advance.

  2. objectives At the end of this topic, students should be able to: • Find the simple discount and proceed • Find the equivalent simple interest rate to simple discount rate • Solve problems involving finding time, proceed, amount and simple discount rate.

  3. Formulae Proceed = S – D = S – Sdt = S(1 – dt) D = Sdt D = simple discount S = amount of loan (at maturity), face value d = simple discount rate per year t = discount period in years

  4. If the discount period is in number of days,

  5. Example 1 Abdul Halim borrowed RM 25000 for 90 days and he was charged a bank discount of What is the bank discount and the proceeds that will be received by Abdul Halim?

  6. Example 2 Asma borrowed from ABC Finance Company which charged bank discount of 12%. If the proceeds received is RM3568 for the period of 215 days, find the value of the discount charged.

  7. Example 3 Jailani borrowed RM54,000 for three years from the Gomen Bank. If the bank discount is 7.6%, what proceed does Jailani received?

  8. the equivalent simple interest rate to simple discount rate Both simple interest rate and simple discount rate are equivalent when both yield the same present value for an amount due in the future. S= P ( 1 + r t ) Proceed = S (1 – d t)

  9. Example 4 Calculate the amount you must repay for each discounted loan listed below : What is the equivalent simple interest for these loan? a)The proceeds is RM1200 for 6 months at 10% b)The proceeds is RM2000 for 24 months at 8%

  10. Example 11 A borrower signs a note for discounted loan and agrees to pay the lender RM3000 in 9 months at a 8% interest per annum. How much does this borrower receive? What is the simple interest rate of the loan amount of RM2,820?

  11. EXERCISE 1 Khairil obtains a proceed of RM4 800 for a loan RM5 000 from a bank that charges a simple discount rate of 5% per year. What is the duration of the loan? Ans : 0.8 years

  12. EXERCISE 2 Find the principal value of RM25 000 for 10 months at a simple interest rate of 8% per year. Ans : RM 23437.50

  13. EXERCISE 3 • RM600 is borrowed from a bank at a simple discount rate of 5% per year for 4 months. Find: • the discount • the proceed • the equivalent simple interest rate. Ans : RM 10, RM 590, 5.085%

  14. EXERCISE 4 • Suzane borrows RM1 800 from a bank for 6 months. The proceed she receives is RM1 500. Find:- • The simple discount rate the bank • charges. • b) The equivalent simple interest rate. Ans : 33.33%, 40%

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