Select Interest, Principal amount, Annual interest rate, or Time in days, enter the three requested values, and select Calculate. Bankers Rule uses simple interest with actual days and a 360-day year.
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Bankers Rule Interest Formula
The banker’s rule uses simple interest with a 360-day year. Select the value to solve for and enter the three displayed inputs.
Rearranged formulas used by the calculator:
- I = interest earned or owed, in dollars
- P = principal amount, in dollars
- r = annual interest rate as a decimal
- t = time period, in days
- 360 = the banker’s rule year length
Select Interest for the main formula, or Principal amount, Annual interest rate, or Time in days for its inverse. Dollar inputs accept cents; actual-day inputs accept whole days. Inverse time can be fractional. Dollar results round halfway upward to cents, while positive sub-cent amounts are identified. Fees, payments and compounding are excluded.
Interest Rate Decimal Conversions
The rate field uses a decimal, not a percent. Divide the percent rate by 100 before entering it.
| Percent Rate | Decimal Rate to Enter |
|---|---|
| 3% | 0.03 |
| 5% | 0.05 |
| 7.5% | 0.075 |
| 12% | 0.12 |
Banker’s Rule Day Count Compared With Exact Simple Interest
The banker’s rule counts actual days and divides by 360. The table compares it with a fixed 365-day convention; other actual-year conventions may use 366 days in leap years. It does not assume every month has 30 days.
| Method | Formula Denominator | Effect on Interest |
|---|---|---|
| Banker’s rule | 360 | Produces slightly more interest than a 365-day denominator for the same days |
| Actual/365 fixed simple interest | 365 | Produces slightly less interest than banker’s rule for the same days |
Example Problems
Example 1: Calculate interest
You borrow $8,000 at an annual rate of 6% for 90 days. Enter the rate as 0.06.
The interest is $120.00.
Example 2: Calculate the interest rate
A $5,000 loan earns $75 in interest over 120 days. To find the annual rate, select Annual interest rate and enter principal, interest and days.
The annual interest rate is 0.045, or 4.5%.
FAQ
What is the banker’s rule for interest?
The banker’s rule is a simple interest method that uses the actual number of days in the time period but treats the year as 360 days. The formula is interest equals principal times rate times days divided by 360.
Should the interest rate be entered as a percent or decimal?
Enter the rate as a decimal. For example, enter 8% as 0.08, 6.5% as 0.065, and 12% as 0.12.
Why does banker’s rule interest use 360 days?
A 360-day year is a banking convention that simplifies interest calculations. For the same positive principal, rate and days, a 360-day denominator produces more interest than a fixed 365-day denominator. Use the convention specified in the agreement.
