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Ordinary & Exact Interest

This document compares and contrasts ordinary interest and exact interest calculations. Ordinary interest is calculated based on a 360-day year and assumes 30 days in each month. Exact interest uses the actual number of days in each month based on a 365-day calendar year. Several examples are provided to demonstrate calculating both ordinary and exact interest for different loan amounts, interest rates, and time periods. The examples show that exact interest calculations typically result in a slightly lower interest amount than ordinary interest calculations.

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Cristy Meguizo Lianto
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220 views7 pages

Ordinary & Exact Interest

This document compares and contrasts ordinary interest and exact interest calculations. Ordinary interest is calculated based on a 360-day year and assumes 30 days in each month. Exact interest uses the actual number of days in each month based on a 365-day calendar year. Several examples are provided to demonstrate calculating both ordinary and exact interest for different loan amounts, interest rates, and time periods. The examples show that exact interest calculations typically result in a slightly lower interest amount than ordinary interest calculations.

Uploaded by

Cristy Meguizo Lianto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ORDINARY

AND
EXACT INTEREST
PREPARED BY:
LIANTO, CRISTY M.
WHAT IS ORDINARY & EXACT INTEREST?
- TWO WAYS OF CALCULATING SIMPLE INTEREST

Ordinary Interest Exact Interest


is calculated on the basis of a Is calculated on a 365-day per
360-day year year calendar
Assume 30-days in each month
Formula:
I = principal * rate * Formula:

day/360 I = principal * rate *


days/365
EXAMPLE1:
Assume you have a $2500 loan at 12% interest for 60 days.
Find the ordinary interest and exact ,interest that you
should pay.
ORDINARY INTEREST EXACT INTEREST
I = principal * rate * day/360 I = principal * rate * day/365
P= $2500 P= $2500
R= 12%(0.12) R= 12%(0.12)
T= 60 DAYS T= 60 DAYS

I = $2500 * 12%(0.12) * 60/360 I = $2500 * 12%(0.12) * 60/365


I = $50 I = $49.31
Example2:
Calculate the ordinary interest of $10,000 at 9.5% interest running
from August 8, 2019 to May 4, 2020. Using a). Approximate time &
b). Actual time
Aug. 30-8 = 22
Sep. 30 APPROXIMATE TIME
Oct. 30
Nov. 30
I = principal * rate * day/360
Dec. 30 P= $10,000
Jn. 30
Feb. 30
R= 9.5%(0.095)
Mar. 30 T= 266 DAYS
Apr. 30
May 4
I = $10,000 (0.095) ( 266/360 days)
Total of days 266 I = $701.94
Aug. 31-8 = 23

Sep. 30 ACTUAL TIME


Oct. 31
I = principal * rate * day/360
Nov. 30
P= $10,000
Dec. 31
R= 9.5%(0.095)
Jn. 31
T= 270 DAYS
Feb. 29
I = $10,000 (0.095) ( 270/360 days)
Mar. 31
I = $712.50
Apr. 30

May 4

Total of days 270


EXAMPLE 3:
What is the ordinary interest on $5,000 for 100 days at 8% interest
rate? Find the exact interest for the $5,000 for also 100 days .

ORDINARY INTEREST EXACT INTEREST


I = principal * rate * day/360 I = principal * rate * day/365
P= $5,000 P= $5,000
R= 8%(0.08)
R= 8%(0.08)
T= 100 DAYS
T= 100 DAYS
I = $5,000 (0.08) (100/360 DAYS)
I = $5,000 (0.08) (100/360 DAYS)
I = $109.59
I = $111.11
THANK YOU !

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