# Accounting for promissory notes at a complex discount rate

A promissory note is a written debt obligation of a strictly established form, which gives the owner of the promissory note (promissory note holder) the undisputed right to demand from the debtor the payment of the amount specified in the promissory note upon expiration of the specified term.

The promissory note specifies the amount that the borrower must pay back to the lender. Very often, the borrower pays interest on the loan when the loan is received. That is, the amount received by the borrower and the amount specified in the promissory note are not the same. Determining the value of the present value assuming it will be the amount stated in the promissory note in the future is called discounting.

If the owner of a promissory note needs money, he can sell his note to a bank or credit institution before the maturity date. Such an operation is called bill discounting. In this case, the bank also performs a discounting operation based on the remaining maturity and pays the note holder the discounted amount - less than what is stated in the note - by deducting the discount.

The discount is calculated through the interest charged by banks on the amount of the bill when the bill is recorded, this interest is called the discount rate or discount interest. Discounting can occur several times a year, which is more favorable to the owner of the bill.

At maturity of the promissory note, the bank realizes the discount, receiving from the debtor the nominal amount specified in the promissory note.

The calculator below allows you to calculate the parameters of a promissory note - face value, discounted amount, maturity or discount rate, provided that the other parameters are set. Thus, to calculate the discounted amount, it is necessary to set the values of face value, maturity and discount rate, leaving the parameter "discounted amount" empty. Similarly, to calculate the other parameters of the promissory note - leave the required parameter empty, and fill in the rest.

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