UNDER THE PROVISIONS OF THE DOMINION INTEREST ACT, REVISED STATUTES OF CANADA 1952, CHAPTER 102, SECTION 6, WHENEVER ANY PRINCIPAL MONEY OR INTEREST SECURED BY A MORTGAGE OF
REAL ESTATE IS, BY THE SAME, MADE PAYABLE ON THE SINKING FUND PLAN, OR ON ANY PLAN IN WHICH THE PAYMENTS OF INTEREST AND PRINCIPAL ARE BLENDED, NO INTEREST WHATSOEVER SHALL BE
CHARGEABLE UNLESS THE MORTGAGE CONTAINS A STATEMENT SHOWING THE AMOUNTS OF SUCH PRINCIPAL AND THE RATE OF INTEREST CHARGEABLE THEREON, CALCULATED YEARLY OR HALF YEARLY NOT IN
ADVANCE.
THE EFFECT OF THE ENACTMENT, INSOFAR AS MONTHLY PAYMENT MORTGAGES ARE CONCERNED, IS TO ELIMINATE A MONTHLY CALCULATION OF ORDINARY SIMPLE INTEREST; INSTEAD, THE
INTEREST MUST BE CALCULATED AT A RATE PER MONTH WHICH, WHEN COMPOUNDED, WOULD IN THE CASE OF A YEARLY CALCULATION, EQUAL THE STATED RATE OF INTEREST PER ANNUM AT THE END OF THE
YEAR, AND IN THE CASE OF HALF YEARLY CALCULATION, EQUAL ONE HALF OF THE STATED INTEREST RATE AT THE END OF THE HALF YEAR.
TO EXPLAIN BY ANALOGY, IF A DEPOSITOR PUT $100.00 IN A BANK WHICH PAID 6% INTEREST PER ANNUM, COMPOUNDED SEMI-ANNUALLY,
THEN AT THE END OF SIX MONTHS, HE WOULD HAVE EARNED INTEREST OF $3.00 AND HAVE $103.00 TO HIS CREDIT.
HOWEVER, IF THIS SAME BANK COMPOUNDED MONTHLY INSTEAD OF SEMI-ANNUALLY, (THAT IS TO SAY, PAID 1/2% OR .005 PER MONTH), THEN THIS DEPOSIT OF $100.00 IN SIX MONTHS WOULD HAVE GROWN
TO $103.04.
IT FOLLOWS THAT IF THE BANK DECIDES TO CONTINUE TO COMPOUND MONTHLY, BUT TO PAY ONLY $3.00 IN SIX MONTHS, THEN IT MUST PAY A MONTHLY INTEREST RATE LESS THAN .005 - IT WOULD ACTUALLY
IN THIS CASE, BE .0049386220.
THIS IS THE INTEREST FACTOR FOR THE CALCULATION OF INTEREST FOR ONE MONTH AT 6% PER ANNUM COMPOUNDED SEMI-ANNUALLY.
