# Interest Calculations

#### Explain this!

##### Junior Member
I have compared two calculations each one at 6% per year for a 360 calendar year:

A. (6/100)/year * 60/360 year * $600 (60/360/year is 60/360 for one year) B. (6/100)/year * 1 year/360 days * 60 days *$600

Why would calculation B be preferred to calculation A? The years cancel in A; so why use calculation B with 1 year/360 days?

#### JeffM

##### Elite Member
What are you trying to do with these calculations?

What is the meaning of the 60/ 360 year?

What do you mean the years cancel in A. The unit of years occurs 3 times so how can they possibly cancel?

Why are you bothering with a 360 day year in the first place?

Dimensional analysis is not a substitute for thought. It is a way of preventing careless errors.

#### Explain this!

##### Junior Member
What are you trying to do with these calculations?

What is the meaning of the 60/ 360 year?

What do you mean the years cancel in A. The unit of years occurs 3 times so how can they possibly cancel?

Why are you bothering with a 360 day year in the first place?

Dimensional analysis is not a substitute for thought. It is a way of preventing careless errors.
I am comparing the two. I do not know why B would be preferred to A. Why is one preferred to the other. You indicted that "It (dimensional analysis) is a way of preventing careless errors." Is B preferred to A because B prevents any careless errors?

60/360 is a fractional part of one year.

The years only occur two times is both calculations. I think that you are confusing (60/360/year is 60/360 for one year) as part of the calculation. It is not part of it.

I used a 360 calendar year because it is easy to cancel out some of the numbers with the 360 calendar year.

Can you now answer my question?

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#### JeffM

##### Elite Member
I am comparing the two. I do not know why B would be preferred to A. Why is one preferred to the other. You indicted that "It (dimensional analysis) is a way of preventing careless errors." Is B preferred to A because B prevents any careless errors?

60/360 is a fractional part of one year.

The years only occur two times is both calculations. I think that you are confusing (60/360/year is 60/360 for one year) as part of the calculation. It is not part of it.

I used a 360 calendar year because it is easy to cancel out some of the numbers with the 360 calendar year.

Can you now answer my question?
Who says that the one computation is correct and the other wrong MATHEMATICALLY? Both give the same numeric result.

The B calculation is clearer in that it more clearly implies that you are assuming a 360 day year and a period of 60 days. The A calculation mushes those two assumptions into a single unexplained fraction. That is an issue of presentation. A is a terrible presentation, but there is no mathematical error in it.

And neither is likely to be exact if you are trying to calculate interest on a real-life bank account.

• Explain this!

#### Explain this!

##### Junior Member
Who says that the one computation is correct and the other wrong MATHEMATICALLY? Both give the same numeric result.

The B calculation is clearer in that it more clearly implies that you are assuming a 360 day year and a period of 60 days. The A calculation mushes those two assumptions into a single unexplained fraction. That is an issue of presentation. A is a terrible presentation, but there is no mathematical error in it.

And neither is likely to be exact if you are trying to calculate interest on a real-life bank account.

No one has said to me or indicated that one computation is correct and the other wrong mathematically. I am just curious that one my be preferred to the other and why.

I am not using these to calculate interest on a real-life bank account.

#### JeffM

##### Elite Member

No one has said to me or indicated that one computation is correct and the other wrong mathematically. I am just curious that one my be preferred to the other and why.

I am not using these to calculate interest on a real-life bank account.
It is just that B is easier to figure out that makes it preferable

In practical applications of math, it is usually important to present things as clearly as possible because (1) it eliminates uncertainty and potential misunderstanding and so (2) avoids wasting time on unnecessary questions. I cannot tell you how much of my life has been wasted in meetings because someone could not be bothered to present results in a clear comprehensible way. It's not math. It is economics and psychology.

• Explain this!

#### Explain this!

##### Junior Member
I want to thank you for the follow-up reply. Your explanation helps me to understand why one calculation is preferred compared to the other.

• JayJay

#### Explain this!

##### Junior Member
I want to thank you for the follow-up reply. Your explanation helps me to understand why one calculation is preferred compared to the other.
Is the following calculation a good one to use? It is somewhat similar to B.

C. (6/100 * 1/360 * 60 * 600) * (1/year * year/days * days * $1/1) = (6) * ($1/1) = \$6.00