Linear Interest Calculation 

Use

Linear interest calculation is also know as simple interest calculation. The accrued interest is not capitalized, even for periods of more than one year.  The interest is not added to the principal until the end of term.

The quotient days/base days is used as a factor for the interest rate in linear interest calculation.

The system uses the following formula for linear interest calculation:

Example

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       1.      An interest rate of 5.5 % is calculated from 02/12/00 to 07/01/00 for a principal amount of EUR 100,000 using the Interest Calculation Method  360E/360. The result is an interest amount of EUR 2,123.61.

The final principal amount is EUR 102,123.61.

 

       2.      An interest rate of 5.5 % is calculated from 02/12/00 to  02/12/03 (3 years) for a principal amount of EUR 100,000 with the interest calculation method 360E/360 .  The result is an interest amount of EUR 16,500.00.

The final principal interest amount, without compound interest, is EUR 116,500.00.