The Simple Discount Rate Calculator is designed for financial scenarios involving non-interest-bearing notes, Treasury bills, or commercial paper where interest is deducted in advance. Unlike simple interest, which is calculated on the principal amount, a simple discount is calculated on the Maturity Value (the final amount due).
In financial terms, the amount you receive today is called the "Proceeds," and the difference between the Maturity Value and the Proceeds is the "Bank Discount."
Simple Discount Formula
To calculate the discount and the proceeds manually, use the following formulas:
D = M × d × t P = M – D
Where:
D = Total Discount Amount (The cost of borrowing)
M = Maturity Value (Face Value of the note)
d = Annual Discount Rate (as a decimal)
t = Time in years
P = Proceeds (The amount received today)
How to Use This Calculator
Enter Maturity Value: Input the total face value of the note or bill that will be paid back at the end of the term.
Enter Discount Rate: Input the quoted annual discount rate (percentage).
Enter Time: Input the duration of the loan or note and select the appropriate unit (Days, Months, or Years).
Review Results: The calculator provides the Total Discount deducted, the Net Proceeds you will receive, and the Equivalent Simple Interest Rate (Yield).
Example Calculation
Suppose you hold a promissory note with a Maturity Value of $10,000. The bank offers to discount this note at an annual rate of 6% for a period of 90 days (using the ordinary 360-day year).
In this scenario, the bank gives you $9,850 today, and you repay $10,000 after 90 days.
Why is the Effective Rate Higher?
You might notice the "Equivalent Simple Interest Rate" in the results is slightly higher than the Discount Rate. This is because the Discount Rate is applied to the future Maturity Value ($10,000), while a standard Interest Rate is applied to the principal/proceeds actually received ($9,850). Since the base for the interest calculation (the proceeds) is smaller than the maturity value, the effective percentage yield is higher.
function calculateDiscount() {
// 1. Get Input Values
var mValue = document.getElementById('maturityValue').value;
var dRate = document.getElementById('discountRate').value;
var tDuration = document.getElementById('timeDuration').value;
var tUnit = document.getElementById('timeUnit').value;
// 2. Validate Inputs
if (mValue === "" || dRate === "" || tDuration === "") {
alert("Please fill in all fields (Maturity Value, Rate, and Time).");
return;
}
var M = parseFloat(mValue);
var d = parseFloat(dRate);
var t = parseFloat(tDuration);
if (isNaN(M) || isNaN(d) || isNaN(t) || M <= 0 || d < 0 || t 0 && timeInYears > 0) {
effectiveRate = (discountAmount / (proceeds * timeInYears)) * 100;
}
// 7. Display Results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
document.getElementById('resDiscount').innerHTML = formatter.format(discountAmount);
document.getElementById('resProceeds').innerHTML = formatter.format(proceeds);
// Handle edge case where proceeds are negative (rate too high for duration)
if (proceeds < 0) {
document.getElementById('resProceeds').innerHTML = "Invalid (Discount exceeds Value)";
document.getElementById('resProceeds').style.color = "red";
document.getElementById('resEffectiveRate').innerHTML = "N/A";
} else {
document.getElementById('resProceeds').style.color = "#222";
document.getElementById('resEffectiveRate').innerHTML = effectiveRate.toFixed(4) + "%";
}
// Show result box
document.getElementById('resultDisplay').style.display = "block";
}