Lesson 14: Defining and

Comparing Actual Time and

Approximate Time
Prepared by: FA1-STM11-3 — GROUP 2

● INTRODUCTION

What are Actual Time and Approximate Time?

Actual time refers to the precise and real measurement of time, often based on
atomic clocks or other highly accurate timekeeping methods. Approximate time,
on the other hand, provides a general or rounded estimate of the current time.
While actual time is exact, approximate time may involve some level of rounding
or imprecision in its representation.

Or simply, approximate time, like ordinary interest, assumes that each of the 12
months in a year has 30 days (360 days in a year). On the other hand, actual
time counts the exact number of days; hence, a year is taken as composed of
365 days.
● FORMULAS
When the time (t) is given between two dates, there are two different methods of
computing the time.

Actual Time (Calendar used: Gregorian Calendar)

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.

Formula:
Exact Time = Number of days excluding the first
day and including the last day.

Example:
March (31-12) 19 days
April 30 days
May 31 days
June 30 days
July 31 days
August. 31 days
September 20 days
_______
192 days

Approximate Time (Calendar used: None, all months are exactly 30 days)
This method considers that there are 30 days in each month or 360 days in one year.

Formula:
Approximate Time = Number of years × 12 × 30 +
Number of months × 30 + Number of days

Example 1: Example 2:
Year: Month: Day: Year: 1993
1993 9 20 Month: 6
1993 3 12 Days: 8
___________ Calculation:
6 8 6 (30) + 8 = 188 days

6 (30) + 8 = 188 days

 Interest Between Dates
● actual time is used in financial contexts where interest accrues based on the
exact number of days.
● approximate time may be used for simpler interest calculations, providing a
convenient estimate in financial contexts.

When interest is to be computed from a certain date to another date inclusively, there are
4 methods of computations:

● Ordinary Interest for Actual Time (Io-Act)

● Ordinary Interest for Approximate Time (Io-App)
● Exact Interest for Actual Time (Ie-Act)
● Exact Interest for Approximate Time (Ie-Act)

Banker’s Rule
used by banks in computing the interest on savings deposit

Formula:
Formula for Ordinary Interest: to = no. of days / 360
Formula for Exact Interest: te = no. of days / 365

Example:
Find the interest using the 4 (four) methods on Php 30,000
at 4.5 from August 2,2020 to November 27, 2020.

Interest = 4.5 %
Savings = Php 30,000
Year = 2020 Leap Year (February 29)
No. of Actual Days = ?; = 117
No. of Approximate Days =?; = 115
Answer: Answer Php 438.75

Solutions:

Step 1: Compute for the days.

Actual Days Month Approximate Days
(31-2 days) 29 August 28 (30-2 days)
30 September 30
31 October 30
27 November 27

Total Days: 117 Total Days: 115

 Step 2: Compute for the interest both for actual ordinary
& exact interest formula and for approximate ordinary &
exact interest formula

Solutions:
P=Principal (Php)
R=rate (%)
T=time (days)

For Actual Ordinary Interest: Io - Act = PRT = Php 30,000 x 4.5% x 117/360 =
Answer Php 438.75 (Bankers Rule)
For Actual Exact Interest: Ie - Act = PRT = Php 30,000 x 4.5% x 117/365 =
Answer Php 432.74
For Approximate Ordinary Interest: Io - Act = PRT = Php 30,000 x 4.5% x
115/360 = Answer Php 431.25
For Approximate Exact Interest: Ie - Act = PRT =VPhp 30,000 x 4.5% x
115/365 = Answer Php 425.34

Based on the information above, actual time is about precise measurement, while
approximate time simplifies calculations by assuming a standard month length. The methods
and formulas reflect these distinctions in precision and ease of computation.

In financial scenarios, the choice between actual and approximate time depends on the level
of precision required for interest calculations. Actual time is preferred when precise interest
accrual is essential, whereas approximate time offers a simpler estimation.