In Calculating the Discount on a Bill of Exchange, the Discount

question 7

Multiple Choice

In calculating the discount on a bill of exchange, the discount rate is applied to what?

• A) The maturity value of the bill for the period it is held by the discounter.
• B) The principal for the period it is held by the discounter.
• C) The face value.
• D) The interest for the period it is held by the discounter.

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Definitions:

Human Action

The study of human behaviour, particularly in the context of individuals' decisions and actions in the economy.

Rational Choice

A theory in economics and sociology that suggests individuals always make prudent and logical decisions that provide them with the highest amount of personal utility.

Irrational Choice

A decision made contrary to the conventional understanding of economic rationality, not maximizing utility.

Incentives

Rewards or penalties that motivate individuals to perform an action or avoid it.