A new Method for computing Interest. 51 



Art. III. — A new Method proposed for computing Interest ; by 

 Geo. R. Perkins, A. M. 



Perhaps there is nothing which requires more to be well un- 

 derstood by all business men, than the principles and rules in 

 relation to interest of money. 



According to all the methods now in use in different countries, 

 as well as the various rules adopted by our different states, there 

 is wide room for different individuals to arrive at very different 

 results in computing the interest on many bills of obligation. 

 That which gives rise to the most difficulty, is the distinction 

 between simple interest and compound interest. By the laws of 

 this country, a loan for any period, even though it exceeds one 

 year, is not allowed any more than simple interest ; while at the 

 same time the loan may be made for as short a period as we 

 please, and at the end of said period the interest may be added 

 to the principal and the result again loaned as a new principal ; 

 by which means it may be made to draw even a greater interest 

 than the ordinary compound interest. So long as the statute of 

 the land has laws to prevent usury, it ought to provide some cer- 

 tain and infallible method for computing interest. 



Another common source of perplexity in computing interest, 

 is in the case of bills of obligation, where payments are made at 

 various periods, some being made at intervals less than one year, 

 and others at longer intervals. So great has this source of per- 

 plexity been, that our different states have adopted their distinct 

 rules in regard to the method of computing interest in such cases. 



It is obvious that so long as the unit of time is a finite quan- 

 tity, as one year, no rule can be devised which shall in all cases 

 be equitable to both parties, for when'the payments are made be- 

 fore the end of the year, they must affect the parties different 

 from what they would when made after they became due. By 

 the many ways in which contracts are drawn, new cases are al- 

 most daily presented, which require much labor as well as skill 

 to determine the exact rate per cent, per annum received. 



I see no way by which such difficulties can be avoided, so long 

 as a finite portion of time is allowed before the interest is consid- 

 ered as due. It may be asked, why is a man's interest any more 

 due at the end of the year, than the half of it at the end of six 



