BANKING AFFAIRS

Detailed explanation-1: -Ordinary simple interest is a SI that takes only 360 days as the equivalent number of days in a year. On the other hand, exact simple interest is a SI that takes exact days in 365 for a normal year or 366 for a leap year.

Detailed explanation-2: -Ordinary simple interest is a simple interest that uses 360 days as the equivalent number of days in a year.

Detailed explanation-3: -Ordinary interest is based on the assumption of thirty days in each month of the calendar year. This leads to a situation where the application of the interest rate is based on 360 days.

Detailed explanation-4: -Actual/360, also known as the 365/360 rule, is the method most commonly used by banks to calculate interest accrual. You get it by dividing the annual interest rate by 360 to get a daily interest rate.

Detailed explanation-5: -Exact interest is calculated based on 365 days a year, and for a leap year, using 366 days. Ordinary interest is calculated using a 360 days a year. It is using an approximation that each month having 30 days. This is to simplify computing and of course it increases the amount of interest due to the lender.