In proportional (simple) calculation is considered, if, for example, in 365 days 5% interest account, then in one day 1/365 of 5%, 10 days 10/365 of 5% … For every day that is 1/365 from 5%. In conformal (compound) philosophy is as follows: on the first day shall be charged interest on the principal and interest that go into tax base for the second day. Which means that for the second day more interest than the first day. Including interest accrued for the second day go into the basis for the calculation of the third day, which in turn means that for the third day more interest than others. Thus, this increasing interest for each day.
The difference between the two ways of clearing, which occurs when the interest will be calculated several times a year (monthly, semi-annually), is out with the small rates and small amounts of small, but not noticeable.
Graph at 10% per annum (blue is proportional, conformal pink). At 100% interest rate for 365 days, the difference is large. Interest shall be accounted for at least once a year. However, it is interesting graph, how to move the relationship between proportional and conformal mode in the period more than one year. If we find that pro conformal charged with REMAINING shortest periods of one year, we get less interest, in periods greater than one year, or indeed vice versa. Made with 100% interest rate for 365 days, and for three years. Especially interesting are situations where the interest rate is given for less than 365 days: 30, or even for one day. If proportional mode is that for one day 1/365 of the interest rate applicable for 365 days, respectively, for 365 days 365 times more than the one day (if it is 1% for one day, for 365 days 365%) is the conformal quite differently. 1% for the day is 3678% for 365 days. Such contracts are best avoided as they can of a dispute, but it is a proportional calculation or conform calculation . You can calculate by using the choice of conversion rates.
If you have loans with the proportional method of clearing and payments on meals several times a year, you can calculate how high should be the rate of interest in conformal statement in order to pay the same interest. Use the selection calculation AAR (annualized rate).
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