Example 1: Simple Amount with Static Rate of interest

Example 1 Scenario

This example calculates interest on Simple Principal ($9,000) at a Static Rate of interest (7.5% per annum) from 16 July 2004 to 21 Sep. 2007 inclusive.

Demonstrated Features

►	Number of amounts menu.

►	Interest rate style menu.

►	Simple Principal.

►	Static Rate of interest.

►	Introduction to report tabs.

Points of Interest

◆	There are three reports with summary and detail sections.

◆	Amounts are shown in words as well as figures.

◆	Every step of the calculation is explained in plain English.

◆	A tabular report compliments the written report.

◆	All aspects of the calculation are exposed for scrutiny.

◆	Calculation Notes even explain the micro-detail.

Multimedia Presentation

Click icon to watch video

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Calculation Results

The results generated by the program are shown below.

Calculation Result

Example 1

►	The result starts with a summary of the principal, period, total interest, amount owing and accumulation rate.

►	Amounts are given in words as well as figures.

•	Calculated interest on nine thousand dollars and zero cents ($9,000.00) for the period 16/07/2004 to 21/09/2007 inclusive, a period of 1163 days.

•	Total interest is two thousand one hundred and forty-nine dollars and ninety cents ($2,149.90).

•

As at 21/09/2007 the total amount owing is eleven thousand one hundred and forty-nine dollars and ninety cents ($11,149.90) comprised of principal of nine thousand dollars and zero cents ($9,000.00) and accumulated interest of two thousand one hundred and forty-nine dollars and ninety cents ($2,149.90).

•	Interest on $9,000.00 continues to accumulate at one dollar and eighty-five cents ($1.85) per day on and from 22/09/2007.

PARTICULARS OF INTEREST

►	Every step of the calculation is then explained, this allows external verification of the calculation's accuracy, thus amplifying the evidential integrity of the result and ensuring that your opponent cannot raise doubt as to the calculation's accuracy.

►	The first line sets out the starting principal, the starting interest rate, and the number of days per year used to convert the annual interest rate into a daily interest rate.

(a) On 16/07/2004 the principal was $9,000.00, the interest rate was 7.5% per annum, and the days per year base used to convert the annual interest rate into the daily interest rate was 366.

►	An interest calculation is made immediately before any calculation parameter changes.

►	In this instance, the daily interest rate is about to change because the days per year divisor is about to change.

►	This is because the Calendar Year option has been selected.

►	The paragraph sets out the calculation in complete detail, including the adjustment to the balance of interest.

(b) Calculated interest on 31/12/2004 because it was the last day before the days per year base changed (from 366 to 365) on 01/01/2005. Interest on $9,000.00 (principal) at 7.5% per annum × 169 days (16/07/2004 to 31/12/2004 inclusive) ÷ 366 (days per year) is $311.68, resulting in a new unpaid interest balance of $311.68 ($0.00 plus $311.68).

►	This paragraph explains what changed, and gives the new daily rate of interest.

►	It specifically refers to the interest rate on Debit balances because it is possible to have different rates on Credit balances. Credit balances are not mentioned because the program has ascertained that this calculation involves no Credit balances.

(c) On 01/01/2005 the days per year base used to convert the annual interest rate into the daily interest rate changed to 365. The daily interest rate is now 0.02054795% on debit balances.

(d) Calculated interest on 21/09/2007. Interest on $9,000.00 (principal) at 7.5% per annum × 994 days (01/01/2005 to 21/09/2007 inclusive) ÷ 365 (days per year) is $1,838.22, resulting in a new unpaid interest balance of $2,149.90 ($311.68 plus $1,838.22).

►	The last three paragraphs summarize the calculation.

►	They give the total owing, and the composition of its constituent parts i.e. principal and interest.

►	The last paragraph says how interest is accruing per day.

►	Amounts are given in words so they can be pasted into legal documents that require that.

(e) As at 21/09/2007 the total amount owing is eleven thousand one hundred and forty-nine dollars and ninety cents ($11,149.90) comprised of principal of nine thousand dollars and zero cents ($9,000.00) and accumulated interest of two thousand one hundred and forty-nine dollars and ninety cents ($2,149.90).

(f) Total interest for the period 16/07/2004 to 21/09/2007 (1163 days) was two thousand one hundred and forty-nine dollars and ninety cents ($2,149.90).

(g) Interest on $9,000.00 continues to accumulate at one dollar and eighty-five cents ($1.85) per day on and from 22/09/2007.

►	The second part of the report explains every step of the calculation but in table format.

►	The table can be printed or pasted into reports.

►	It is normally provided in Landscape format - it has been modified here for display on this web page.

►	It is a more compact way of narrating the calculation.

INTEREST CALCULATION TABLE

DATE	DESCRIPTION	DAYS	AMOUNT	BALANCE	PRINCIPAL	INTEREST
16/07/2004	Interest rate started at 7.5% on debit balances (0.0204918% per day).			$9,000.00DR	$9,000.00DR	$0.00DR
31/12/2004	Interest (16/07/2004 to 31/12/2004 inclusive) $9,000.00 × 0.0204918% × 169 days = $311.68.	169	$311.68DR	$9,311.68DR	$9,000.00DR	$311.68DR
01/01/2005	Days per year changed to 365. Daily interest rate now 0.02054795% on debit balances.			$9,311.68DR	$9,000.00DR	$311.68DR
21/09/2007	Interest (01/01/2005 to 21/09/2007 inclusive) $9,000.00 × 0.02054795% × 994 days = $1,838.22.	994	$1,838.22DR	$11,149.90DR	$9,000.00DR	$2,149.90DR
	Final Balance	1163		$11,149.90DR	$9,000.00DR	$2,149.90DR

►	The third part of the report provides details about the calculation.

►	This is to complete the program's policy of exposing every factor that affects the calculation.

►	It also provides useful information about optional settings, and how they might be reviewed.

Calculation Notes

The following information is provided to give you a complete understanding of the calculation, so even the finest details are available if ever needed.

►	Once you are familiar with the program you will see that some settings are default settings (eg in an interest rates file) that can be overridden.

►	This paragraph gives the status of that.

1. The main calculation options (such as days per year, credit Application order and rounding) have been taken from the settings on the main form. These options can be changed for individual calculations in Settings|Options, or for all new cases in Settings|Setup.

2. The debit interest rates have been taken from the settings on the main form.

3. The credit interest rates (if required) have been taken from the settings on the main form.

►	This paragraph tells you the number of decimal places you have selected for rounding interest rates.

►	There are times when there are legislative or contractual rules about this factor.

4. Decimal Rounding. When converting from an annual rate of interest to a daily rate of interest, and except if overridden in an interest rates file, the program has rounded-up to 8 decimal places, eg 8.12512324924555 is rounded to 8.12512325%. You can change the setting in Settings|Options.

►	This paragraph demonstrates just one of many warnings and insights the program will give you.

►	It explains that the Calendar Year option has been selected and that it complicates the calculation.

5. Calendar Year. You are using the "Calendar Year" method for converting the annual interest rate to the daily interest rate. In many cases this is the most accurate setting but you should be aware that it adds complexity to the calculation report because it requires additional interest calculations before and after each leap year. If you require a simpler report and it is appropriate to do so then choose a different setting. The setting is either embedded in the Options section of the selected interest rate file or else it is set in Settings|Options on the main form. In either case you can change or override the setting for a particular calculation in Settings|Options. Please note that such settings only apply to the current calculation. You can change the default value that affects all new calculations in Settings|Setup. The default value cannot however automatically override any setting in the Options part of an interest rate file - you still have to override on an individual basis as explained above.