Lessons · Law foundations · interest on a judgment
Interest on a judgment, at the rate the order gives
Simple interest is the amount times the rate times the fraction of a year it has run for, and the rate and the year length both come from the order or the rule in front of you.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
In beta. This lesson was written for Hone and has not yet been checked by an attorney. Practice material, not professional advice. What that means.
What it is for
A client asks what the judgment is worth if it is paid next month rather than today. Answering that in one line, from the figures on the order, is a small piece of arithmetic that makes the office look like it knows what it holds.
How to think about it
Take it in two steps, always. First the interest for a whole year, then the fraction of a year that has actually passed. Keep the year length the order gives, because it is not always the same.
Worked example
Judgment $30,000, rate 8 percent a year, 365-day year, 90 days elapsed.Four numbers, all from the order or the rule; none from memory.
A full year: $30,000 times 0.08 is $2,400.Interest for one whole year, before any fraction is taken.
The fraction: 90 days out of 365.Days elapsed over days in the year, as the rule defines the year.
$2,400 times 90 divided by 365 is $591.78.Rounded to cents at the end and not before, or the pennies drift.
Your turn
A judgment of $50,000 carries 6 percent a year. Write the interest for one full year.
$50,000 at 6 percent for one full year: $
Solve one, graded on the server
The trap
Using a 360-day year because a form somewhere did. The year length is part of the rule you were given, and swapping it changes every figure in the letter by about one and a half percent.