Banker’s Discount: Suppose a merchant A busy goods worth, say Rs. 10,000 from another merchant B at a credit of say 5 months. Then, B prepares a bill, called the bill of exchange. A sings this bill and allows B to withdraw the amount from bank account after exactly 5 months.
The date exactly after 5 months is called nominally due date. Three days are adds to it get a date, known as legally due date.
Suppose B wants to have the money before the legally due date. Then he can have the money from the banker or broker, who deducts S.I. on the face value for the period from the date on which the bill was discounted and the legally due date. This amount is known as Banker’s Discount.
Thus, B.D. is the S.I. on the face value for the period from the date on which the bill was discounted and legally due date.
Banker’s Gain=(B.D) – (T.D) for the unexpired time
