Small interval calculations is fairly straight forward. But what about long intervals. If a loan's daycount is set to Actual/Actual and the duration has run into two different DayCount intervals, how abouts would you calculate the interest? Would you split it into two intervals?
A loan is accruing interest from December 15, 2015 to January 15 2016. Calculate the interest Accrued.
Principal is at 21,049.71 Interest is at 9.1% Compounding semi-annually
The total days passed was 31 days.
Do you calculate interest accrued from December 15 to December 31 then add it with January's accrued interest? Or do you calculate it in one whole interval.
Effective Annual Rate = (1 + 9.1/100/2)^2 = 1.09307025 Daily_Rate_365 = (1.09307025)^(16/365) = 1.003908571 Daily_Rate_366 = (1.09307025)^(15/366) = 1.00365381 Interest Accrued for first interval = (0.003908571) * 21049.71 = 82.274 Interest Accrued for second interval = (0.00365381) * (21049.71 + 82.274) = 77.21 Total interest Accrued = 159.486
This is incorrect, the interest accrued is 159.26 but I'm not sure how it's calculated.