Chapter 10, Problem 4CR

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# The interest calculation method that uses 365 days (366 in leap year) as the time factor denominator is known as______ interest. (10-2)

To determine

To fill: The blank given in the statement “The interest calculation method that uses 365(366 in a leap year) as the time factor denominator is known as _________ interest”.

Explanation

Exact interest refers to the interest that is calculated by taking 365 days in a year schedule by banks or other financial institutions.

The formula to compute the interest is Interest=Principal×Rate×Time.

Consider an example:

The principal amount of loan is $2,500, the rate of interest is 6% and the time period is 74 days. Compute the exact interest, Evaluate the time as Time=Number of days of a loan365=74365=0.2027 Substitute$2,500 for principal, 0

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