Posted by Eduardo (OR) on November 14, 2000 at 20:13:20:

Jeff–

You ask an esoteric question. United States Rule is generally used for long term unvestments, in particular for mortgages. Under U.S. Rule the interest is computed each time a payment is made. In other words, in the United States, the payment period and the computational period for mortgage interest coincide (unlike mortgages in some other countries). If the payment is larger than the amount of the payment, the difference is used to reduce the principal. You never have a compound interest situation occuring where interest is computed on interest in amortized or interest-only mortgages. Only when the payment is less than interest-only. Thus, most mortgages are simple interest situations. U.S. Rule is generally contrasted with Merchant’s Rule. Merchant’s Rule is used in some business transactions for short term debt. The interest under Merchant’s Rule is computed differently and results in negligible differences when the term is short and the amounts are small. I suspect that your Normal Annual Rate (not a term in wide useage) is just another way of computing under the U.S. Rule if TValue gives you the same result, but I’m not sure about this as I don’t run TValue. Hope this helps. --Eduardo