Example: A note of $250, dated July 7, payable in 60 days, is discounted July 7 at 6%; find the proceeds.
Explanation: This note is due in 63 days, or September 8. The accurate interest of $250 for 63 days at 6% is $2.59. The proceeds, then, will be $250-$2.59, or $247.41.
The Present Worth of a note or debt is a sum, which, if put at interest, will amount to that debt in the given time.
The True Discount is the difference between the debt at maturity and its present worth.
Remember:
1. To allow three days of grace, if the debt discounted is a note.
2. To add the interest due at maturity to the principal, before discounting, if the note bears interest.
Examples: Case I.—Note not bearing interest.
What is the present worth and true discount on a note of $200, if paid 6 months before due, the discount being 6%.
Solution: Amount of $1 for 6 months at 6% = $1.03. If $1.03 = amount of $1, $200 is the amount of as many dollars as 200⁄1.03, or $194.17+.