When irregular payments occur, the "odd days" that are not part of a complete compound period must be accounted for. These odd days are collectively referred to as a stub period. TValue recognizes the length of stub periods in addition to the compound periods present in a calculation.
TValue computes interest on odd days similar to how it computes interest using exact days compounding. Interest for each stub period is calculated at the daily rate times the exact number of days in the period.
Interest for a stub period of five days earning 10 percent annual interest on a $20,000 balance using a 365 day year is computed as follows:
$20,000 x .10 / 365 x 5 = $27.40
Daily, exact days, and continuous compounding, do not produce odd days.
Interest rate and related terminology varies. The definitions provided here reflect usage within the TValue program. Our experience with a wide variety of users has led us to this usage. Be alert to possible differences between TValue and your own requirements.