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.
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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.

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Discount
Proceed
Future
value
• The interest deducted from the
amount of a loan
• The amount of money that we
received as a loan
• the value of the loan less the
discount.
• total amount that we repay
• also called “face value”
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Formulae
D = Sdt
D
S
d
t
Proceed = S – D
= S – Sdt
= S(1 – dt)
= simple discount
= amount of loan (at maturity), face value
= simple discount rate per year
= discount period in years
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If the discount period is in number of days,
t 
number of days
360
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Example 1
Abdul Halim borrowed RM 25000 for 90 days and
he was charged a bank discount of 6
1
%.
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What is the bank discount and the proceeds that
will be received by Abdul Halim?
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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.
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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?
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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.
Proceed = S (1 – d t)
r 
d
1  dt
or
S= P ( 1 + r t )
r 
discount
proceed  tim e
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%
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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?
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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
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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
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EXERCISE 3
RM600 is borrowed from a bank at a simple
discount rate of 5% per year for 4 months.
Find:
a) the discount
b) the proceed
c) the equivalent simple interest rate.
Ans : RM 10, RM 590, 5.085%
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EXERCISE 4
Suzane borrows RM1 800 from a bank for 6
months. The proceed she receives is RM1 500.
Find:a) The simple discount rate the bank
charges.
b) The equivalent simple interest rate.
Ans : 33.33%, 40%
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