Interest Formula: Days

Solving for the unknown factor for the formula when time is stated in whole days using either ordinary interest dating or exact interest dating: All Example 1 will use ordinary interest dating and All Example 2 will use exact interest dating in this handout. PXRXT=I P = Principle (The amount borrowed before interest) R = Rate (stated as a one year rate) T = Time (for this handout we will state time in “days/360” ordinary interest dating or “days/365” exact interest dating) I = Interest (Cost to borrow money from another entity) This box has the basic formula:

Interest

Principle Rate Time

This box shows the basic formula to find principle:

Interest

Principle Rate Time

MJC Revised 1/2012

Page 1

Interest Formula: Days
Example 1: Cindy borrows money with a rate of 5% for 180 days with an interest of $125, using ordinary interest dating. Cindy’s principle is $5,000.

Example 2: Cindy borrows money with a rate of 5% for 180 days with an interest of $123.29, using exact interest dating. Cindy’s principle is $5,000.

MJC Revised 1/2012

Page 2

Interest Formula: Days
This box shows the basic formula to find rate.

Interest

Principle Rate Time

Example 1: Cindy borrows money with a principle of $5,000 for 180 days with an interest of $125. Cindy’s rate is 5%.

Example 2: Cindy borrows money with a principle of $5,000 for 180 days with an interest of $123.29. Cindy’s rate is 5%.

MJC Revised 1/2012

Page 3

Interest Formula: Days

This box shows the basic formula to find time.

Interest

Principle Rate Time

Example 1: Cindy borrows money with a principle of $5,000, a rate of 5% and with an interest of $125. Cindy’s time is 180 days.

MJC Revised 1/2012

Page 4

Interest Formula: Days

Example 2: Cindy borrows money with a principle of $5,000, a rate of 5% and with an interest of $123.29. Cindy’s time is 180 days.

Note: When time is less than 1 multiply “T” by 360 to get the number of days for ordinary interest dating and multiply “T” by 365 to get the number of days for exact interest dating.

MJC Revised 1/2012

Page 5

Interest Formula: Days
This box shows the basic formula to find interest.

Interest

Principle Rate Time

PXRXT=I Example 1: Cindy borrows money with a principle of $5,000, a rate of 5% and with a time of 180 days, using ordinary interest dating. Cindy interest is $125. $5,000 X 5% X 180/360 = I $5,000 X 5%X .5 = I $250 X .5 = $125 Example 2: Cindy borrows money with a principle of $5,000, a rate of 5% and with a time of 180 days, using exact interest dating. Cindy’s interest is $123.29. $5,000 X 5% X 180/365 = I $5,000 X 5%X .49315 = I $250 X .49315 = $123.29

Note: In order to get .5 for the time you must divide 180 by 360 which will then results in .5 as the answer for example 1. For example 2 you must divide 180 by 365 which will result in .49315 as the rounded answer.

MJC Revised 1/2012

Page 6

Sign up to vote on this title
UsefulNot useful