4.5 Find The Exact and Ordinary Interest

When time period is in days, instead of year or months, there are two methods commonly used to calculate time (for Time in Interest formula).

1.	Exact interest - uses 365 as the number of days in a year.
2.	Ordinary interest or banker’s interest - uses 360 as the number of days in a year. Financial institutions usually use ordinary interest as it produces more interest.

4.5 Find The Exact and Ordinary Interest

Example 20
Find the interest earned from RM 61,000 investment made by Aisyah for 150 days at 12%. Calculate using both the exact interest and ordinary interest.

Solution:

The total interest received will be higher for ordinary interest as compared to the exact interest.

4.5 Find The Exact and Ordinary Interest

Example 21
Md. Firdaus signs a promissory note to a bank with a face value of RM 3,500 for 150 days at 9 ½% exact interests. Find the interest he must pay and the total amount due at maturity.

Solution:

4.5 Find The Exact and Ordinary Interest

Example 22
Use the exact interest method to find the interest on a RM 36,500, 9% note dated April 19 and due on September 16.

Solution:
1. Time period of the note.



2. The interest charged.