CMA Intermediate · Financial Management and Business Data Analytics · Money Market
A bank discounts a 90-day commercial bill of ₹5,00,000 drawn by Sharma Traders on Gupta Stores at a discount rate of 12% per annum (360-day year, discount on bill value). What amount does Sharma Traders receive?
The bank deducts discount on the bill value: ₹5,00,000 x 12% x 90/360 = ₹15,000. Sharma Traders therefore receives ₹4,85,000. Adding the discount or using 180 days instead of 90 would produce incorrect figures.
- A₹4,85,000Correct
- B₹4,70,000
- C₹4,88,000
- D₹5,15,000
Explanation
Discount = 5,00,000 x 12% x 90/360 = ₹15,000. Proceeds = 5,00,000 - 15,000 = ₹4,85,000. Check: 15,000/5,00,000 = 3% for a quarter of a year at 12%. ₹4,70,000 results from using 180 days; ₹5,15,000 wrongly adds the discount.
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