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What is Understanding 360 vs 365 Day Interest about?

The 360-day calendar is commonly used in financial markets and is based on averaging the solar and lunar calendars. There are two main methods for calculating interest on loans - the 365/365 method which uses a 365-day year, and the 360/365 method which uses a 360-day year. While an 8% interest rate on a $10 million loan would equal $800,000 yearly using the 365/365 method, the 360/365 method results in an additional $11,111 in interest paid annually due to accruing interest on 360 days rather than 365. It

Author

Arfa Punjani

Language

EN