# United States Banker Rule

• Sep 29th 2010, 01:51 PM
BreedingtheSpawn
United States Banker Rule
A partial payment is made on the date(s) indicated. Use the United States Rule to determine the balance due on the note at the date of maturity. (The Effective Date is the date the note was written.) Assume the year is not a leap year.

Partial \$6000
Rate 6.5 %
Effective Date May 16
Maturity Date February 22
Partial Amount \$3500
Payment Date January 9

\$2519.86
\$2793.69
\$2779.74
\$2716.41

Any help on this problem would be appreciated, what I am getting confused on is the United States Banker Rule.
• Sep 30th 2010, 03:55 AM
emakarov
It may happen that nobody in this forum knows what the United States Banker Rule is, so it is better to provide a definition. Also, you may get better responses in the Business Math forum.
• Sep 30th 2010, 04:33 AM
BreedingtheSpawn
Quote:

Originally Posted by emakarov
It may happen that nobody in this forum knows what the United States Banker Rule is, so it is better to provide a definition. Also, you may get better responses in the Business Math forum.

Here is a definition of the US Rule: The US Rule determines interest paid on the loan after a partial payment is made before the due date of the loan. The partial payment pays the interest first for that given time and then a part of the principal. The interest for the remaining part of the loan is calculated on the new principal and the days since the partial payment. When applying the US Rule, the Banker's Rule is used to calculate the interest (360 days = 1 year and any fractional part of a year = exact number of days.)
• Sep 30th 2010, 10:35 AM
emakarov
Disclaimer: my specialization is mathematical logic.

(All calculations done in OpenOffice Calc.)

Between the effective date and the partial payment date there are 238 date. Therefore, the interest on that date was \$6000 * 0.0065 * 238 / 360 = \$257.83. The partial payment is greater that that interest, so the balance of the payment is applied to the principle. Therefore, the new principle is \$6000 + 257.83 - 3500 = \$2757.83.

Between the partial payment date and the maturity date there are 44 days, so the interest is \$2757.83 * 0.0065 * 44 / 360 = \$21.91. So, the balance due is \$2757.83 + \$21.91.