Posted by mariam on Friday, June 8, 2012 at 11:37am.
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Exact simple interest means we count the number of days in the year (some say it is 365, leap year or not) to do the calculation of simple interest.
Ordinary simple interest is based on the banker's year of 12 months of 30 days, or 360 days a year. This is equivalent to a slightly higher interest rate.
Exact time means we calculate the loan duration by the number of days between the loan and repayment.
If we borrowed on January 1st 2012 to March 1st 2012, the exact time is 31+29 =60 days.
Approximate time is counting the number of complete months plus a certain number of days, if applicable. The extra days are divided by 30 to get a fraction of months.
Example:
Exact time and exact simple interest:
RM 2000 at 10% pa
March 15 to August 29.
Number of days:
16+30+31+30+31+29=167 days
Period: 167/366 year
Rate: 10%
Interest: RM 2000*(10/100)*167/366= RM 91.26 (to the nearest cent, 0.01RM)
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