# Correct way to calculating interest accrued with leap year

Principal is \$119,654.7 compounding semi annually Disbursal Date is 11/25/2015 Initial Payment is 3/15/2016 Interest Rate 9.1%

In this case - there is 36 days in 365 - there is 75 days in 366 - Total of 111 days

How should interest Accrued be calculated?

Example 1.

`````` InterestAccrued = (((1 + 0.091/2)^2 )^ (36/365 + 75/366)  - 1 ) * 119654.7
= 3276.27
``````

Or should the interest accrued be split and added together like below

Example 2.

`````` InterestAccrued = (((1 + 0.091/2)^2 )^ (36/365)  - 1 ) * 119654.7
= 1054.84895
InterestAccrued += (((1 + 0.091/2)^2 )^ (75/366)  - 1 ) * 119654.7
= 3256.86
``````

Or should the interest balance be added on to the balance before calculating interest accrued

Example 3

`````` InterestAccrued = (((1 + 0.091/2)^2 )^ (36/365)  - 1 ) * 119654.7
= 1054.84895
InterestAccrued = (((1 + 0.091/2)^2 )^ (75/366)  - 1 ) * (119654.7 + InterestAccrued )
= 3276.27
``````
• The finance companies with which I have experience have used either a fixed 360 or 365 day year, so they ignore leap years. Nov 30, 2015 at 16:01
• I wish that was my case, their product is Actual/Actual. Nov 30, 2015 at 16:04
• The correct answer is example 2 then Nov 30, 2015 at 17:50