Deriving Compound Interest for Odd Duration such as in Days

**e4excel** · 03-23-2009, 01:21 PM

Deriving Compound Interest for Odd Duration such as in Days

What formula should be used to calculate the Maturity Value for an Odd Duration.?

Ex: -

Principal ( P ) - 10,000
Int ( R )- 8%
Compounding Freq ( m )- Quarterly ( 4 )
Duration ( n ) - 390 Days..

I have checked most sites and also reffered some Finance Mgmnt books, but they are focussing more on whole no of years or half-years, but in real life one can take a Fixed Deposit in any Bank for just 50 days or 73 days..

Then how does one calculate the Maturity value in such cases?

Warm Regards

e4excel

**martindwilson** · 03-23-2009, 02:34 PM

apparantly there are 2 ways actual/360 and exact/365! so which one?
and also whether its calculated daily and compounded annually!
some ideas here
http://forums.moneysavingexpert.com/....html?t=600170

**e4excel** · 03-24-2009, 07:49 AM

Deriving Compound Interest for Odd Duration such as in Days

What formula should be used to calculate the Maturity Value for an Odd Duration.?

Ex: -

Principal ( P ) - 10,000
Int ( R )- 8%
Compounding Freq ( m )- Quarterly ( 4 )
Duration ( n ) - 390 Days

I need to use two dates such as Starting Date and Ending Date to get a duration and further use this duration in the Compound Interest formula mentioned below..

[ C.I.n = P X (1 + R/m)^(m X n ) ]

How do I use this formula to get the Maturity Value for an Deposit for less than a year or a duration which is not a whole no?

Most of the Websites are using a whole number as duration but how do I use it for shorter or odd durations?

How do I get the value for ( n ) to be used in this formula?

Please consider the compounding Frequency is Quarterly hence m = 4 ( 12/3 )

**martindwilson** · 03-24-2009, 07:17 PM

sorry mate i dont know the formula for that. there must be an example out there somwhere.

**e4excel** · 03-25-2009, 12:09 AM

Originally Posted by martindwilson

sorry mate i dont know the formula for that. there must be an example out there somwhere.

Hi Martin,

Appreciate you honesty mate..!
Wish someone had a solution for the same as otherwise most solutions on the Websites are just merely bookish and not something tobe used in real-life..

How else would I be able to confirm the Maturity Value of any Fixed Deposit in a Bank when all the other variables are present in an non-whole duration scenario?

**e4excel** · 03-27-2009, 05:19 AM

Originally Posted by martindwilson

apparantly there are 2 ways actual/360 and exact/365! so which one?
and also whether its calculated daily and compounded annually!
some ideas here
http://forums.moneysavingexpert.com/....html?t=600170

I checked this link and I now understood that I need to use the total no of days divided by 365 or 360...

But I dont understand what it means by Actual/360 and Exact/365 and where do we use 360 and 365? and also what about the Leap Years where it should be 366?

I tried using this example in examples where I know the Maturiy Value but its gicing slight difference I do not understand why it is that?