![]() ![]() For purposes of computing interest for short periods, the commercial year or 360 days is commonly used, but when large sum of money are involved, exact interest is computed on the basis of 365 days.ģ. Although the time may be less than one year, most applications for loans are for periods of less than one year. Thus, 6 percent interest means six cents charged for the use of principal borrowed for one year. The time is expressed as a decimal fraction. Most of the profit for a bank are derived from the interest that they charge for the use of their own or their deposits’ money.Īll problems in interest my be solve by using one general equation that may be started as follows :Īny one of the four quantities-that is, interest, principal, rate, or time – may be found when the other three are known. Interest is the sum charged for borrowing money for a period of time : Principal is the term used for money that is borrowed, and rate of interest in the percent per year of the principal charged for its use. ![]()
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