When calculating ordinary interest, the denominator of the time fraction will be:
A) exact days per month
B) 365
C) 30 days per month
D) 360

Question

Quizplus · Accepted Answer

When calculating ordinary interest, the denominator of the time fraction should be 360. This is because ordinary interest assumes that a year has 360 days (12 months * 30 days). This is different from using actual days per month (option A) or 30 days per month (option C) which assumes that each month has a specific number of days. Using 365 (option B) would be inaccurate because it assumes that each year has 365 days, which is not the case.

When Calculating Ordinary Interest, the Denominator of the Time Fraction