Module 3.

2:
Ordinary and Exact Interests
When time is expressed in days and
the interest rate is in terms of
percent per year

1
 Activity 3.2.1
(answer after the lesson proper)
 Matthew plans to invest ₱10,00 in a bank which offers a
5% annual interest rate for 400 days. Which of the
following methods will Matthew prefer in computing the
interest? Why?
 Ordinary interest for exact time
 Ordinary interest for approximate time
 Exact interest for exact time
 Exact interest for approximate time
2
 Exact Interests (Ie)
computed and settled on the basis
of a 365-day year.
𝒕
𝑰𝒆 = 𝑷𝒓(𝟑𝟔𝟓),
where t refers to the number of days
 Ordinary Interests (Io)
computed and settled on the basis
of a 360-day year.
𝑡
𝐼𝑜 = Pr( ),
360
where t refers to the number of days
Illustrative Example 3.2.1: If ₱32,500 is invested for 150 days at
7.1% interest rate, which of the two methods, exact or ordinary,
offers a higher interest?

Given: P = 32,500; t = 150 days;

r = 7.1% = 0.071

𝒕 𝒕
Solve for: 𝑰𝒆 = 𝑷𝒓 Solve for: 𝑰𝒂 = 𝑷𝒓
𝟑𝟔𝟓 𝟑𝟔𝟎

= ₱948.29 = ₱961.46

5
Exact and Approximate Time
These methods are used to count
the number of days from the loan
date to the maturity date.
 Exact Time
The actual number of days in each
month from the start to the
maturity of the loan.
 Approximate Time
Assuming that there are 30 days per
month from the start to the
maturity of the loan.
Illustrative Example 3.2.2: Using exact and approximate time
methods, count the number of days from June 26, 2011 to April 16,
2012. In which method is there more number of days?
Exact Time Approximate Time
June 26, 2011: 4 (30 – 26)
June 26, 2011: 4 (30 – 26)
July 31 July 30
August 31 August 30

September 30 September 30
October 30
October 31
November 30
November 30
December 30
December 31 January 2012 31
January 2012 31 February 30

February 29 (leap year) March 30

April 16 (DUE DATE)
March 31
Total 290 days
April 16 (DUE DATE) 9

Total 295 days

 Table of Values (Actual Days)
Afte r the month of Fe brua ry a dd one da y for Le a p Ye a r
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1 001 032 060 091 121 152 182 213 244 274 305 335
2 002 033 061 092 122 153 183 214 245 275 306 336
3 003 034 062 093 123 154 184 215 246 276 307 337
4 004 035 063 094 124 155 185 216 247 277 308 338
5 005 036 064 095 125 156 186 217 248 278 309 339
6 006 037 065 096 126 157 187 218 249 279 310 340
7 007 038 066 097 127 158 188 219 250 280 311 341
8 008 039 067 098 128 159 189 220 251 281 312 342
9 009 040 068 099 129 160 190 221 252 282 313 343
10 010 041 069 100 130 161 191 222 253 283 314 344
11 011 042 070 101 131 162 192 223 254 284 315 345
12 012 043 071 102 132 163 193 224 255 285 316 346
13 013 044 072 103 133 164 194 225 256 286 317 347
14 014 045 073 104 134 165 195 226 257 287 318 348
15 015 046 074 105 135 166 196 227 258 288 319 349
16 016 047 075 106 136 167 197 228 259 289 320 350
17 017 048 076 107 137 168 198 229 260 290 321 351
18 018 049 077 108 138 169 199 230 261 291 322 352
19 019 050 078 109 139 170 200 231 262 292 323 353
20 020 051 079 110 140 171 201 232 263 293 324 354
21 021 052 080 111 141 172 202 233 264 294 325 355
22 022 053 081 112 142 173 203 234 265 295 326 356
23 023 054 082 113 143 174 204 235 266 296 327 357
24 024 055 083 114 144 175 205 236 267 297 328 358
25 025 056 084 115 145 176 206 237 268 298 329 359
26 026 057 085 116 146 177 207 238 269 299 330 360
27 027 058 086 117 147 178 208 239 270 300 331 361
28 028 059 087 118 148 179 209 240 271 301 332 362
29 029 088 119 149 180 210 241 272 302 333 363
30 030 089 120 150 181 211 242 273 303 334 364
31 031 090 151 212 243 304 365
Finding the actual time using table of
values
 June 10 to Sept 24, 2012
Start: June 10 = 161 days End: Sept 24 = 267 days
Therefore: 267 – 161 = 106 days
 Oct 31, 2004 to Mar 25,2005
Start: Oct 31 = 304 days End: Mar 25 = 84 days
Different years: Oct – Dec: 365 – 304 = 61 days
Mar 25: 84 days
= 145 days
11
 Feb 12 – Oct 27, 2014
Start: Feb 12 = 43 days End: Oct 27 = 300 days
Therefore: 300 – 43 = 257 days
 Jan 12 – Apr 25, 2019
Start: Jan 12 = 12 days End: Apr 25 = 115 days
Therefore: 115 – 12 = 103 days
 Nov 29,2019 – Mar 23, 2020
Start: Nov 29 = 333 days End: Mar 23 = 82 days
Different years: Nov 29 – Dec 31: 365-333 = 32 days
Mar 23: 82 days
114 days
12
Determine the number of days
between the two dates

Dates Exact Approximate

Days Days

Jan 16 – April 11 13

Aug 10 – Nov 28
May 5 – Dec 24
Sep 1,2019-May 23,2020
Apr 8,2019-May 18,2020
Classification of Interests
Interests can be classified into
different forms when the loan and
maturity dates are given
 Classification of Interests

Ordinary interest for exact time Ordinary interest for approximate time

𝒆𝒙𝒂𝒄𝒕 𝒕𝒊𝒎𝒆 𝒂𝒑𝒑𝒓𝒐𝒙𝒊𝒎𝒂𝒕𝒆 𝒕𝒊𝒎𝒆

𝑰𝒐𝒆 = 𝑷𝒓 𝑰𝒐𝒂 = 𝑷𝒓
𝟑𝟔𝟎 𝟑𝟔𝟎

Exact interest for exact time Exact interest for approximate time

𝒆𝒙𝒂𝒄𝒕 𝒕𝒊𝒎𝒆 𝒂𝒑𝒑𝒓𝒐𝒙𝒊𝒎𝒂𝒕𝒆 𝒕𝒊𝒎𝒆

𝑰𝒆𝒆 = 𝑷𝒓 𝑰𝒆𝒂 = 𝑷𝒓
𝟑𝟔𝟓 𝟑𝟔𝟓

15
Illustrative Example 3.2.3

1
Mr. John Ley borrowed ₱20,760 at 3 %
2
simple interest on July 13, 2019. The loan
is payable on March 16, 2020. Compare
the simple interest using the four forms
and identify which of them has the highest
interest.
16
Determine the exact and approximate time
from July 13, 2019 to March 16, 2020:
Date Exact Time Approximate Time
July 13, 2019 18 (31-13) 17 (30 - 13)
August 31 30
September 30 30
October 31 30
November 30 30
December 31 30
January 2020 31 30
February 29 (leap year) 30
March 16 16 16
TOTAL 247 days 243 days 17
Given: P = ₱20,760; r = 3.5%=0.035
te = 247 days; ta = 243 days
Ordinary Interest, Exact Time** Ordinary Interest Approximate Time

𝑰𝒐𝒆 𝑰𝒐𝒂
𝟐𝟒𝟕 𝟐𝟒𝟑
= 𝟐𝟎𝟕𝟔𝟎 𝟎. 𝟎𝟑𝟓 𝑰𝒐𝒆 = (𝟐𝟎𝟕𝟔𝟎)(𝟎. 𝟎𝟑𝟓) 𝑰𝒐𝒂
𝟑𝟔𝟎 𝟑𝟔𝟎
𝒆𝒙𝒂𝒄𝒕 𝒕𝒊𝒎𝒆 𝒂𝒑𝒑𝒓𝒐𝒙 𝒕𝒊𝒎𝒆
= 𝑷𝒓 = 𝑷𝒓
𝟑𝟔𝟎 𝟑𝟔𝟎

𝑰𝒐𝒆 = ₱𝟒𝟗𝟖. 𝟓𝟑 𝑰𝒐𝒂 = ₱𝟒𝟗𝟎. 𝟒𝟔

18
Given: P = ₱20,760; r = 3.5%=0.035
te = 247 days; ta = 243 days
Exact Interest, Exact Time Exact Interest Approximate Time

𝑰𝒆𝒆 𝑰𝒆𝒂
𝟐𝟒𝟕 𝟐𝟒𝟑
= 𝟐𝟎𝟕𝟔𝟎 𝟎. 𝟎𝟑𝟓 𝑰𝒆𝒆 = (𝟐𝟎𝟕𝟔𝟎)(𝟎. 𝟎𝟑𝟓) 𝑰𝒆𝒂
𝟑𝟔𝟓 𝟑𝟔𝟓
𝒆𝒙𝒂𝒄𝒕 𝒕𝒊𝒎𝒆 𝒂𝒑𝒑𝒓𝒐𝒙 𝒕𝒊𝒎𝒆
= 𝑷𝒓 = 𝑷𝒓
𝟑𝟔𝟓 𝟑𝟔𝟓

𝑰𝒆𝒆 = ₱𝟒𝟗𝟏. 𝟕𝟎 𝑰𝒆𝒂 = ₱𝟒𝟖𝟑. 𝟕𝟒

19
 Activity 3.2.2 – 3.2.5

Refer to Canvas Discussion for

these activities

20