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Actual and Approximate Time

The document discusses exact and approximate methods for calculating the time between two dates. The exact method counts the actual number of days, while the approximate method considers 30 days per month or 360 days per year. It also describes four methods for calculating simple interest given a principal amount invested over a period of time between two dates: using the exact time and approximate time with both ordinary interest and exact interest calculations.

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Ariane Malou Gorreon
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442 views2 pages

Actual and Approximate Time

The document discusses exact and approximate methods for calculating the time between two dates. The exact method counts the actual number of days, while the approximate method considers 30 days per month or 360 days per year. It also describes four methods for calculating simple interest given a principal amount invested over a period of time between two dates: using the exact time and approximate time with both ordinary interest and exact interest calculations.

Uploaded by

Ariane Malou Gorreon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Exact and Approximate Time

When the time t is given between two dates, there are two different methods
of computing for the time.

1. Exact or Actual Time


This is the actual number of days between two dates.
General Rule: Exclude the first day and include the last day in
counting the exact number of days.

2. Approximate Time
This method considers that there are 30 days in each month or
360 days in one year.
Example:
Find the exact and approximate time between the following dates:
1. March 12, 1993 to September 20, 1993
2. August 6, 1990 to October 5, 1991

Solution:
a. March 12, 1993 to September 20, 1993

Exact or Actual Time Approximate Time


March (31-12) 19 days Year: Month: Day
April 30 days 1993 9 20
May 31 days 1993 3 12
June 30 days 6 8
July 31 days
August 31 days 6(30) + 8 = 188 days
September 20 days
192 days

b. August 6, 1990 to October 5, 1991

Exact or Actual Time Approximate Time


Aug. 6, 1990 to Aug. 6, 1991 = 1 year = 365 days Year: Month: Day
Add: 1991 10 5
August (31-6) 25 days 1990 8 6
September 30
October 5 days 1 1 29
425 days
1(360)+1(30)+29=419 days

Considering exact and approximate time in computing for the simple interest
when time is given between two dates, four methods of computing interest
arise:
a. Ordinary Interest at Exact Time
b. Ordinary Interest at Approximate Time
c. Exact Interest at Exact Time
d. Exact Interest at Approximate Time

ACC 112: Mathematics of Investment


1
Note: Of the four methods mentioned, the most commonly used method
known as the “Banker’s Rule” is method a.

Example:
If P4,000 is invested at 8% from August 6, 1990 to October 5, 1991,
compute for the interest using the four methods mentioned above.

Solution:
From the previous example, there are 425 exact days and 419
approximate days between August 6, 1990 and October 5, 1991.

a. Io at exact time b. Io at approximate time


425 419
I o =( 4 , 000)( 0 . 08)( ) I o =( 4 , 000)( 0 . 08)( )
360 360
Io = P377.78 Io = P372.44

c. Ie at exact time d. Ie at approximate time


425 419
I e=( 4 , 000 )( 0. 08 )( ) I e=( 4 , 000 )( 0. 08 )( )
365 365
Ie = P372.60 Ie = P367.34

ACC 112: Mathematics of Investment


2

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