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Simple Interest Formula (360-day year):
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Simple interest calculation based on a 360-day year is a common method used in financial calculations, particularly in commercial lending and some banking systems. It assumes each year has 360 days for interest calculation purposes.
The calculator uses the simple interest formula:
Where:
Explanation: This formula calculates the interest earned or paid based on the principal amount, annual interest rate, and the number of days the money is borrowed or invested, using a 360-day year convention.
Details: Simple interest calculations are fundamental in various financial transactions including short-term loans, promissory notes, and some types of investments. The 360-day year convention simplifies calculations and is widely used in commercial banking.
Tips: Enter the principal amount in ₹ or your currency, annual interest rate as a percentage (e.g., enter 5 for 5%), and the number of days. All values must be positive numbers.
Q1: Why use 360 days instead of 365?
A: The 360-day year convention simplifies interest calculations by using 12 equal months of 30 days each, making manual calculations easier and creating standardized periods.
Q2: Where is the 360-day year commonly used?
A: This method is frequently used in commercial loans, corporate bonds, and some government securities, particularly in the United States and international money markets.
Q3: How does this differ from exact day interest?
A: Exact day interest uses 365 (or 366 in leap years) days, resulting in slightly different interest amounts compared to the 360-day method.
Q4: When should I use 360-day vs 365-day calculation?
A: Use the method specified in your financial agreement. The 360-day method typically results in slightly higher interest amounts for the lender compared to exact day calculations.
Q5: Can this calculator handle different currencies?
A: Yes, while displaying ₹ symbol, you can use any currency as the calculation is mathematical and currency-agnostic.