4 basic conCeptS

Four basic conCeptS in simple inTerest

*Exact time- it is the exact number of days between 2 given dates.
*Approximate time- it assumes a month has 30days in the calculation of number of days between 2 given dates.
*Ordinary simple interest- in calculating ordinary simple interest, we use a 360-day year.
*Exact simple interest- this uses a 365/366-day year for interest computation.
RM 1500 was invested on 15 March 2008. If the simple interest rate offered was 10% per annum, find the interest received on 29 August 2008
Concept used Interest calculations
(a) Exact time and exact simple interest
I= 1500x0.1x167/365
=RM 68.63
(b) Exact time and ordinary simple interest I= 1500x0.1x167/360
= RM 69.58
(c) Approximate time and exact simple interest I= 1500x0.1x164/365
= RM 67.40
(d) Approximate time and ordinary simple interest I= 1500x0.1x164/360
= RM 68.33


Banker’s rule- method (b) is called Banker’s rule. In Malaysia, calculation of interest is governed by a banking rule which states that the 365-day year must be used.