Interest between Dates
The Interest between Dates calculation lets you calculate simple and compound interest between two dates based upon a fixed interest rate or upon variable interest rates contained in a variable interest table. It allows you to choose between six different day count conventions and four rounding options.
Before doing interest between dates calculations, you should ask yourself the following questions:
What dates count as interest dates?
Different rules exist concerning the days count as interest days. Depending on the type of interest calculation that's performed (late payments, underpayments, overpayments, deposits, withdrawals, etc.) it is quite possible that either the start day or the end day does not count as an interest day.
Such a rule could be that when a withdrawal is made, only the last day of the previous period is counted.
As it would be practically impossible to account for all the possible rules, FinKit assumes that every day up to the day before the end date counts as a full day. Please adjust the start and/or the end date depending on the applicable rules.
For example, if interest is to be calculated for a deposit on March 1st, 2003, and rules stipulate that no interest should be calculated for the start day, enter March 2nd, 2003, as the start date.
What rounding is applied to interest payments?
Sometimes interest is not to be rounded at all, but rules could stipulate that interest should be rounded up, down or to the nearest value...
FinKit always rounds to the same precision as the start value. For instance, if the start value is "1,000.00", and you would like to round to 5 digits after the decimal point, enter the start value as "1,000.00000".
The rounding pop-up menu lets you specify whether interest is rounded on screen only, to the nearest value, up or down.
What about leap days?
When using the actual/actual day count convention, days in leap years count as 1/366th of a year while days in non-leap years count as 1/365th of a year.
FinKit automatically adjusts for the actual number of days in each year, even when a variable interest table period covers both days that fall in a leap year and days that fall in a non-leap year.
When using the actual/365 fixed day count convention, days in leap years count as 1/365th of a year.
To see the difference between the two methods, please have a look at the Year Fraction calculation. Enter 1/1/2000 as the start date and 1/1/2002 as the end date: you'll see that using the actual/actual day count, two full years are counted, while the actual/365 fixed method counts two years and a (leap) day.
Conclusion
As different rules generate different results, make sure that you know the rules if you want accurate results!
Input
| •
fixed interest rate |
|
| • compounding frequency | |
| • start date | |
| • end date | |
| • start value | |
| • interest rounding: | |
| • none: interest is only rounded on screen, internally it is not rounded | |
| • nearest: interest is rounded up or down to the nearest value based upon the precision of the start value | |
| • up: interest is rounded up to the same precision as the start value | |
| • down: interest is rounded down to the same precision as the start value | |
Note: When a variable interest rate is selected, the start and end dates must be within the limits of the selected table, otherwise input dates will be marked as invalid.
Results
| • end value |
| • total interest |
| • total interest days |
| • number of leap days |
Getting variable interest tables tables
Several variable interest tables are available at the ParanzaSoft web site. If you create some "interesting" variable interest tables or found a link that you would like to share with other FinKit users, please email us.
Example
| • | On
January 1, 2002 someone borrows $1,000 at 18 % simple interest. The actual/360
day count is used.
Answer: $1,071.00. |
Related topics
| Simple interest |
| Compound interest |
| Variable interest tables |
| Day count conventions |
| Year Fraction |
| Date Series |
| Time between Dates |