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Simple Interest Daily Rate

Simple Interest Daily Rate

Timur2015-12-02 12:51:12

In case, the funds are invested for a certain amount of days the time interval is taken as the fractional number of years. That is, you take the number of days and divide it by the number of days per year - the resulting fractional number is used in the conventional formula. However, here are some tricks. The thing is that the number of the deposit days and the number of days in a year can be defined in different ways and the results are slightly differ from one another :)

Three methods are used:
The first method is exact percentage method with the exact number of days. Here, the exact number of days determined by the calendar and the number of days in a year equal to 365 or 366 for a leap year.
The second method is the bank method. It uses the concept of the bank year which is equal to 360 days. As the name implies it is used by banks and gives them an advantage when granting loans for more than 360 days.
The third method is the common interest method with an approximate number of days. The number of days per month here is taken as 30, and the number of days per year is 360.

Since you have to set amount of days in the calculator, there is no difference between the second and the third methods. But in fact, the number of days for the second and third method calculation must be different.

Simple Interest Daily RateCreative Commons Attribution/Share-Alike License 3.0 (Unported)

Small note: usually the date of the loan and the date of its return is considered as one day.

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