When a bill is paid before its date at a lesser value, it is?

When a bill is paid before its date at a lesser value, it is discounted. This means that the holder of the bill, usually a bank, will pay the bill's value to the bill's holder before its due date, but at a reduced rate. The reduced rate is usually calculated based on the time left before the bill's due date, the value of the bill, and a discount rate agreed upon by the parties involved. For example, if a bill worth $1,000 with a 10% discount rate is due in 60 days, the holder of the bill may choose to discount it after 30 days. The bank would then pay the holder a discounted value of, say, $950, which is $1,000 less 10% of $1,000. By discounting the bill, the holder gets cash in hand before the due date, while the bank earns a profit by receiving the full value of the bill on its due date.