How Did They Come Up with This Figure?

[Jeremy007]

With regard to calculating interest on drawings, GTG (F4.13) states:
"if all the drawings are uniform and they are assumed to have been made on the 1st of every month, then calculate interest on the full year's drawing amount for 6.5 months."
I couldn't figure out why they used 6.5 months. Is there a special formula on interest calculation? Besides, what do they mean by "product method"? Is the term explained in F2 or F1? I haven't done F1, but have gone through F2 hastily?

Andrew or anybody, could you kindly shed some light on my queions above? Many thanks.

[Sonal]

Hi,

Drawings are uniform throughout the year i.e. suppose he/she has withdrawn same amount for all the 12 months.

Lets take an illustration:

Aperson has withdrawn $200 every month.

Jan: 200 x 12months interest
Feb: 200 x 11months interest
Mar:200 x 10months interest
Apr: 200 x 9months interest
May: 200 x 8months interest
Jun:200 x 7months interest
Jul 200 x 6months interest
Aug: 200 x 5months interest
Sep:200 x 4months interest
Oct: 200 x 3months interest
Nov: 200 x 2months interest
Dec:200 x 1months interest
total: 2400 x 78 months

Hence,
2400 x 78/12
2400 x 6.5

Hope this helps

[Jeremy007]

Hi,

Drawings are uniform throughout the year i.e. suppose he/she has withdrawn same amount for all the 12 months.

Lets take an illustration:

Aperson has withdrawn $200 every month.

Jan: 200 x 12months interest
Feb: 200 x 11months interest
Mar:200 x 10months interest
Apr: 200 x 9months interest
May: 200 x 8months interest
Jun:200 x 7months interest
Jul 200 x 6months interest
Aug: 200 x 5months interest
Sep:200 x 4months interest
Oct: 200 x 3months interest
Nov: 200 x 2months interest
Dec:200 x 1months interest
total: 2400 x 78 months

Hence,
2400 x 78/12
2400 x 6.5

Hope this helps

Sonal
Thank you very much indeed for your clarification, which is really helpful.
Cheers
Jeremy