Calculate interest, principal, rate, or time for loans using Bankers Rule with a 360-day year when any three inputs are known to solve the fourth value.
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Bankers Rule Interest Formula
The banker’s rule uses simple interest with a 360-day year. Enter any three values to calculate the missing value.
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
If you leave Interest blank, the calculator uses the main formula to find the dollar amount of interest. If you leave Principal, Rate, or Time blank, it rearranges the same formula to solve for that missing value.
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 the actual number of days in the loan or investment period, but divides by 360 instead of 365.
| Method | Formula Denominator | Effect on Interest |
|---|---|---|
| Banker’s rule | 360 | Produces slightly more interest than a 365-day denominator for the same days |
| Exact 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, leave the rate field blank.
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. Since 360 is less than 365, banker’s rule usually gives slightly higher interest than exact simple interest when the same principal, rate, and number of days are used.
