Summary
Highlights
The video introduces two types of interest calculations based on the number of days in a year: exact time and approximate time. Ordinary interest (I_o) assumes 360 days in a year, making its formula I_o = P * R * (Days / 360). Exact interest (I_e) assumes 365 days in a year, with the formula I_e = P * R * (Days / 365). Ordinary interest is typically higher and is often referred to as 'bankers interest'. If not specified, ordinary interest is generally assumed.
An example demonstrates finding ordinary and exact interest on 15,300 pesos for 90 days at 7 and 3/5 percent simple interest. The ordinary interest is calculated as 290 pesos, and the exact interest is 286.72 pesos, confirming that ordinary interest is greater than exact interest.
Another example calculates ordinary and exact interest on 10,600 pesos for 105 days at 8.23 percent simple interest. The ordinary interest comes out to 254.44 pesos, and the exact interest is 250.96 pesos.
This example involves Natsu borrowing 30,000 pesos at 11.8 percent simple interest for 180 days. Since the interest type is not specified, ordinary interest is used. The interest calculated is 1,770 pesos. The total amount Natsu pays back is the principal plus the interest, totaling 31,770 pesos.
The final example focuses on finding the simple exact interest rate at which Gray should invest 25,500 pesos to earn 5,500 pesos in 5 years and 175 days. The formula R = I / (P * T) is used. After calculating the total days and converting them for exact interest, the rate is determined to be 3.94%.