Interest
Calculating the amount of interest is very straightforward. There are three items needed to figure out the amount of interest: the principal, the interest rate, and the period of time that the loan is outstanding. The principal is the amount of the loan (the face value). The interest rate is usually expressed as an annual figure. The period of time that the loan is outstanding is expressed in either days or months.
Let's say that we issued a $1,000 note at a rate of 12 percent for 90 days. The way to calculate the interest is:
Some people use 360 days as the number of days in the year. The note should specify what the basis should be, ...
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