Exact Interest
Traditional simple-interest method using actual elapsed days and a 365-day or stated actual-year basis.
Interest terms that distinguish day-count denominators, general calculation methods, and amounts measured before deductions.
Exact, ordinary, and gross interest are not three competing versions of the same measure. Exact Interest and Ordinary Interest are traditional simple-interest labels associated with 365-day and 360-day year assumptions. Gross Interest instead describes an amount before specified deductions.
Interest Calculation provides the broader framework for combining balance, rate, time, compounding, and cash-flow timing. Modern contracts may use more precise day-count conventions than the traditional exact-versus-ordinary labels, so the governing document remains decisive.
Suppose USD 10,000 earns 6% simple annual interest for 90 days. Using a 365-day denominator, the calculation is USD 10,000 x 0.06 x (90 / 365) = USD 147.95.
Using a 360-day denominator, the calculation is USD 10,000 x 0.06 x (90 / 360) = USD 150.00.
The USD 2.05 difference comes from the denominator, not from a different quoted annual rate. Whether either method is appropriate depends on the contract. If USD 150 is the gross interest, taxes, withholding, fees, or other deductions may make the net amount different.
Do not substitute a familiar classroom convention for the method stated in a financial agreement or disclosure.
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Traditional simple-interest method using actual elapsed days and a 365-day or stated actual-year basis.
Interest amount measured before specified deductions such as withholding tax, account charges, or related costs.
Process of determining interest from the applicable balance, rate, time, day count, compounding, cash flows, and contract terms.
Traditional simple-interest method that uses a 360-day year, with the day numerator determined separately.