A bill is discounted at 10% per annum. If banker's discount is allowed, at what rate percent should the proceeds be invested so that nothing will be lost?
- 10 2/9%
- 11 1/9%
- 11%
- None of these
Explanation
- The bill is discounted at 10% per annum.
- Banker's discount (BD) is allowed, which means the interest is deducted from the face value of the bill.
- To avoid any loss, the proceeds should be invested at a rate that earns the same interest as the discount.
Mathematically:
BD = (BG × 100) / (100 - BG)
where BG is the banker's gain.
Since the discount rate is 10%:
BG = 10
Now, solve for BD:
BD = (10 × 100) / (100 - 10)
= 1000 / 90
= 100/9
The banker's discount is 100/9, which means the proceeds should be invested at:
(100/9) × (1/10) × 100 = 11 1/9%
Related MCQs
- 11
- 12
- 13
- None of these
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- 20%
- 15%
- 10%
- None of these
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