Which formula correctly calculates interest earned on a deposit over a period?

Which formula correctly calculates interest earned on a deposit over a period?

• A. Interest = Amount × Annualised Rate ÷ 360
• B. Interest = Amount × Annualised Rate × Days
• C. Interest = Amount × Annualised Rate × (Days ÷ 360)
• D. Interest = Amount + Rate × Days

Answer: (C)

Interest earned on a deposit grows with the principal, the annual rate, and the time the money is invested, with time expressed as a fraction of a year. Since the rate is per year, you multiply by the portion of the year the funds are deposited. If a 360-day year is used, that portion is Days/360. So the correct expression is Amount × Annualised Rate × (Days ÷ 360). The other forms either miss the time factor, treat Days as if it were a full year, or use addition instead of multiplication, which doesn’t reflect how interest accrues.

Interest earned on a deposit grows with the principal, the annual rate, and the time the money is invested, with time expressed as a fraction of a year. Since the rate is per year, you multiply by the portion of the year the funds are deposited. If a 360-day year is used, that portion is Days/360. So the correct expression is Amount × Annualised Rate × (Days ÷ 360). The other forms either miss the time factor, treat Days as if it were a full year, or use addition instead of multiplication, which doesn’t reflect how interest accrues.