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 the face value before its maturity is called discounting. This means that the holder of the bill sells it to a bank or other financial institution for an amount less than its face value, and the difference between the face value and the discounted price represents the interest earned by the bank or financial institution. The holder of the bill receives immediate cash for the bill, rather than having to wait until the maturity date to receive the full face value of the bill. Discounting is a common practice used by businesses to raise funds quickly, particularly when they have outstanding bills that have not yet been paid by their customers.