Find the amount of interest on a loan at 9% interest rate for 238 days

Expert Answers
gsenviro eNotes educator| Certified Educator

The interest is calculated by multiple methods, depending on the terms of loan. The loan can be based on ordinary interest, where we consider a 30-day month or 360 days in an year. In comparison, the exact interest assumes 365 days per year. These two are simple interest methods. The loan can also be compounded, that is, the interest payable on loan is also added to the principal amount. 

For a principal loan amount of say, $1000, ordinary interest on 9% annual rate is:

Ordinary interest = 1000 x 9 x (238/360) / 100 = $59.50

Exact interest = 1000 x 9 x (238/365) / 100 = $58.69

Compounded interest = 1000 (1+9/100)^(238/365) - 1000 = $57.8

Thus, depending on the terms of loan (and the loan amount), one can calculate the particular type of interest for a given time duration.

Hope this helps