How would you deal with the month of february in a daily interest calculation on a loan that compounds monthly?
I would think that with 30/360 day count convention, each day in february results in accruing "more daily interest" than usual because you are spreading a month's worth of interest across 28 days instead of 30.
For example, say you borrowed $100 on 2/1/2017 and it carries a 12% interest, compounded monthly. This effectively should mean you accrue $1 worth of interest at end of February, resulting in end balance of $101, and then 1% again on that $101 at the end of March, for end balance at 3/31/2017 of $102.01. Below is a sample calculation.
Notice that the daily interest in february is higher than the daily interest beginning 3/1. Is this the correct way to accrue interest in February? I understand in months like March, you dont accrue on the 31st, but want to figure out properly how to calculate the end balances on certain dates.