# 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.

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: 72 days x ((1 year)/(360 days )) = 1/5 years Using the formula for solving the simple interest; Interest = Principal x Rate x Time Interest =$15,000 x 6% x 1/5

Interest = $15,000 x 0.06 x 1/5 Interest =$180

##### $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:

51 days x ((1 year)/(365 days )) = 51/365 years

Using the formula for solving the simple interest;

Interest = Principal x Rate x Time

Interest = $1,800 x 8% x 51/365 Interest =$1,800 x 0.08 x 51/365

Interest = $20.12 Therefore, the Louie will pay$20.12 interest.

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