I have a question that I need help on. If I have a $1,000 note that is calculating simple interest on a 360 day basis and that note is outstanding from Jan 1st 2001 till Dec 31st 2001 ( 1 year ). Is interest on that note calculated be taking $1,000 * 8% / 360 * 360 days outstanding or
is it calculated as $1,000 * 8% /360 * 365 days outstanding? Please Help. Thanks Vince

Telling us that it is a 360 day basis is only half the story - we need the denominator. Do you know what you are implying by using the word "simple"?

Is it a commercial loan? If so, it probably is 365/360, and your second calculation would be appropriate.

Is it a consumer mortgage loan? If so, it is probably 30/360 (simple monthly interest), and the first calculation would be appropriate.

By the way, Vince C., did you lead the NL in stolen bases for six consective seasons?

Jokerman, no, I was not involved with the NL .
This loan was a business loan and my question was basically if a loan is made with interest calculated on a 360 day basis, then, assuming actual days outstanding is 365, does the days outstanding gets capped to 360 days because interest is calculated on a 360 day basis. Personally, I think that days outstanding should be actual days outstanding regardless of how the interest is calculated. I wanted to see if you guys agreed with me. Thanks Vince

No, business loans are typically written on a 365/360 basis. This is an industry standard, and results in interest accruing slightly higher than the nominal rate. For example, on an "8%" loan, interest would actually accrue at 8.11%.

Calculate 360/365 as follows:

From Jan 1 to Jan 31 is $1,000 times .08 times 364 divided by 360 = $80.89

Thanks all for the helpful comments...!!