# Answered Essay: If a sum of money is due in 6 months, what rate of simple discount is equivalent to a simple interest rate of 10% pa.?

If a sum of money is due in 6 months, what rate of simple discount is equivalent to a simple interest rate of 10% pa.?

Let us supose that S = sum repaid after 6 months is \$ 100

This amount includes Interest @ 10% pa (or) 5% for 6 months

Thus principle repayment = P = 100 / (1.05) = 95.24

D = Discount = S – P ……….i.e 100 – 95.24 = 4.76

Discount rate = D/S * 100 = 4.76 / 100 * 100 = 4.76%

On annual basis ………it shall be 4.76 * 2 = 9.52 %

Thus 10% simple interest equivalent is 9.52% simple discount rate

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