Difference between revisions of "Simple Interest Formula"

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Latest revision as of 12:04, 11 June 2019

Definition

Simple Interest denotes the direct calculation of interest to the principal sum of a loan or deposit (without compounding of previous interest rate periods)

Formula


SI = \left[ \sum_{i=1}^{d_b} (\frac{r_i \times n_i}{N}) \right] \ \times \frac{N}{d_c}

Where

  • d_b is the number of business days in the interest period
  • d_c is the number of calendar days in the interest period
  • r_i is the interest rate applicable on business day i
  • n_i is the number of calendar days for which rate ri applies (on most days, ni will be 1, but on a Friday it will generally be 3, and it will also be larger than 1 on the business day before a holiday).
  • N is the market convention for quoting the number of days in the year.

See Also


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