Explanation: According to Banker's rule, we take EXACT number of days to find the simple interest. For example, let's say we have the principle amount $100 with 5% interest rate, we use the following formula to find the simple interest using Banker's rule:
SI = P * I * (t/360)
Where SI = Simple interest P = Principle amount = $100 t = Exact days = 360 (in this case) I = interest = 5% = 0.05
Rule that allows financial institutions to calculate simple interest using 360 days in a year is called the BANKER'S RULE.
A bankers year consists of 360 days. This rule helps in calculating interest on a loan amount and this is based on interest and exact time which yields a higher amount of interest.
