The banker's discount on a sum due 2 years hence is 11/10 of the true discount. What is the annual rate of interest (simple)?

Given data

• Time t = 2 years; BD = (11÷10) × TD.

Concept/Approach
For simple interest, BD ÷ TD = 1 + r t where r is the annual rate (in decimals).

Step-by-Step calculation
1 + r t = 11 ÷ 10 r × 2 = 1÷10 ⇒ r = 1÷20 = 0.05 Rate = 5% per annum

Verification/Alternative
True discount formula TD = S r t ÷ (1 + r t); Banker's discount BD = S r t. Their ratio is indeed 1 + r t.

Common pitfalls

• Using compound interest relations; the problem uses simple discount/interest.

Final Answer
5% per annum