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Kinds of Simple Interest
There are basically two kinds of simple interest: ordinary and exact. These two terms
uses the same formula for solving the simple interest but they differ on using the time.
Ordinary simple interest is a simple interest that uses 360 days as the equivalent number
of days in a year. On the other hand, Exact simple interest is a simple interest that uses
exact number of days in a year which is 365 (or 366 for leap year).
These two kinds of simple interest are only applicable if the unit of time used is in days.
Example 1:
On May 30, 2012 a businessman loans $15,000 in the bank for the expansion of his restaurant. It
was agreed that he will pay the amount with 6% rate of interest on August 10, 2012. What is the
ordinary simple interest to be paid?
$180
Explanation:
Principal amount is $15,000.
Rate of interest is 6%.
Counting the number of days from May 30 to August 10;
Note: Since May 30 is the beginning date, it is not included in counting.
May 31 1
June 1-30 30
July 1-31 31
August 1-10 10 Total 72 days
Converting days into years:
1year 1
72 days x ( ) = years
360days 5
Using the formula for solving the simple interest;
Interest = Principal x Rate x Time
1
Interest = $15,000 x 6% x
5
1
Interest = $15,000 x 0.06 x
5
Interest = $180
Therefore, the businessman will pay $180 interest.
Example 2:
Louie borrowed $1800 from his aunt last December 25, 2010. He promised that he will pay his
aunt on February 14, 2011 at 8% interest. Find the exact simple interest to be paid by Louie.
$20.12
Explanation:
Principal amount is $1,800.
Rate of interest is 8%.
Counting the number of days from December 25 to February 14;
Dec 25-31 6
Jan 1-31 31
Feb 1-14 14
Total 51 days
Converting days into years:
1year 51
51 days x ( ) = years
365days 365
Using the formula for solving the simple interest;
Interest = Principal x Rate x Time
51
Interest = $1,800 x 8% x
365
51
Interest = $1,800 x 0.08 x
365
Interest = $20.12
Therefore, the Louie will pay $20.12 interest.
Percentage (/learn/consumermath/percentage)
Simple Interest (/learn/consumermath/simple-interest-intro)
Kinds of Simple Interest (/learn/consumermath/simple-interest-example)
Calculating Simple Interest (/learn/consumermath/simple-interest-calculation)
Calculate Total Amount for Simple Interest (/learn/consumermath/simple-interest-
total-amount-calculation)
Simple Interest Time Calculation (/learn/consumermath/simple-interest-time-
calculation)
Calculating Principal for Simple-Interest (/learn/consumermath/simple-interest-
principle-calculation)
Compound Interest (/learn/consumermath/compound-interest-intro)
Calculating Compound Interest (/learn/consumermath/calculation-compound-interest)
Calculating the Compound Principal (/learn/consumermath/compound-principle-
calculation)
Calculate Compound Rate of Interest (/learn/consumermath/compound-rate-of-
interest-calculation)
Calculating the Time (/learn/consumermath/compound-interest-time-period-
calculation)
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