To sell a bill at less that the face value before its maturity is?

To sell a bill at less that the face value before its maturity is?

Answer Details

To sell a bill at less than its face value before its maturity is called discounting. Discounting is a common practice in financial transactions, especially in the banking sector, where a bank buys a bill of exchange from its holder before the maturity date at a discounted rate. The holder receives immediate payment for the bill, minus the discount, and the bank earns the full face value of the bill when it matures. The discount rate is determined by the bank's cost of funds and the perceived risk of the bill. Discounting helps businesses to improve their cash flow by converting their receivables into cash before they are due, and it also provides liquidity to the financial system.