# Question #a1ad0

##### 1 Answer

Nov 16, 2017

#### Answer:

#### Explanation:

Actual interest calculations may take many forms, from an actual "daily" accrual to an annual fixed rate. When an "average monthly balance" is used with a monthly calculation, the annual rate is just divided by 12 - the part of the annual rate that would be for that month.

Thus the "rate" for the month is just

Applying this to the average balance we obtain:

If you wanted to calculate actual DAILY interest you would just divide the annual rate by 365. Then you'd have to apply that to the "average daily balance" for each day of the period.