Hey guys,

General question here, I’m trying to make memorising these formulas easier for myself, and i’m curious if anyone can explain to me why certain formulas use (1.05)^120/365 and others (1+(.05*(120/365)) for adjusting an interest rate based on the length of the loan. This is obviously assuming a 5% interest rate over 120 days.

I’m just trying to understand why certain formulas would use one over the other as they result in a very very similar number but certain formulas use one vs the other. Any help would be appreciated.

Borson