ANNUAL ACTUAL INTEREST RATE CALCULATION FORMULA AND SAMPLES

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Leonard James
6 years ago
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1 ANNUAL ACTUAL INTEREST RATE CALCULATION FORMULA AND SAMPLES Baks calculate aual actual iterest rate o grated credits based o article 13 of the law of RA About cosumer creditig. The aual actual iterest rate is the customer s total expeses o creditig expressed by aual iterest rate of the credit grated. The aual actual iterest rate is calculated by the followig formula: where i aual actual iterest rate A iitial credit amout curret umber of paymet o credit N last umber of paymet o credit K sum of Nth paymet D umber showig how much time passed sice receivig the credit till the regular Nth paymet o credit. Samples of aual actual iterest rate calculatio 1. Suppose a cosumer credit was grated o the followig coditios: Credit amout AMD Nomial iterest rate 10% calculated o reduced balace of the credit Credit period 1 year (365 days) Other expeses 0. It is uderstood that the repaymet order is mothly equal istallmets, i.e. =12. Proceedig from the sample data we shall have the followig repaymet schedule: Repaymet periodicity Number of days from receivig the credit till the regular paymet D Sum o repaid iterest pricipal credit amout Regular total paymet o credit repaymet K Total

2 If the paymet order i by uequal istallmets, the Repaymet periodicity Number of days from receivig the credit till the regular paymet D Sum o repaid iterest pricipal credit amout Regular total paymet o credit repaymet K Total Suppose a cosumer credit was grated o the followig coditios: Credit amout AMD Nomial iterest rate 10% calculated o reduced balace of the credit Credit period 1 year (365 days) Repaymet order: mothly i equal istallmets Customer s paymets o the date of receivig the credit: AMD for documetatio preparatio AMD for the credit service.

3 It follows that N = 13, oe paymet of which was made whe receivig the credit ad the other 12 paymets o the pricipal debt ad iterest. Other paymets made o the day of receivig the credit (K1) make: K1 = =6000 ad 3. Suppose a car credit was grated o the followig coditios: Credit amout 3 millio AMD Nomial iterest rate 10% calculated o reduced balace of the credit Credit period 2 years (730 days) Repaymet order: mothly i equal istallmets Customer s other expeses: AMD sigle paymet for the car evaluatio AMD sigle paymet for the credit service AMD sigle paymet for documetatio preparatio - alog with mothly repaymet of the pricipal amout ad iterest 1000 AMD for the credit service (altogether AMD). Aual isurace fee: 2.5% of the car cost of which the first paymet ( *0.025=75000 AMD) is made o the date of receivig the credit, ad the ext paymets (amortizatio icluded: *0.025=67500 AMD) is made for the followig year. As per the terms, the followig repaymet schedule is formed: Repaymet periodicity Number of days from receivig the credit till the regular paymet D Other expeses Sum o repaid iterest pricipal credit amout Regular total paymet o credit repaymet K

4 Total As per the terms it appears that =26, out of which oe paymet was made whe receivig the credit, the other paymet - isurace fee for the secod year, ad other 24 paymets o the pricipal credit amout, iterest ad credit service which must be paid oe time o mothly basis. Other paymets made o the day of receivig the credit (K1) make: K1= =98000 ad 4. Suppose a cosumer credit for purchasig furiture was grated o the followig coditios:

5 Credit amout AMD Nomial iterest rate 10% if the customer is a member of Furiture-makers Associatio ad 25% if the customer is ot a member of this associatio Credit period 9 moths (273 days) Repaymet order: quarterly i equal istallmets Customer s other paymets o the date of receivig the credit: AMD for the credit service AMD for documetatio preparatio - fee for eterig Furiture-makers Associatio :, where 9 is the credit period. The borrower is a member of Furiture-makers Associatio. As per the terms = 4. Other paymets made o the day of receivig the credit (K1) make: K1 = =20000 ad.

Chapter 5 Time Value of Money

Chapter 5 Time Value of Money Chapter 5 Time Value of Moey 1. Suppose you deposit $100 i a bak that pays 10% iterest per year. How much will you have i the bak oe year later? 2. Suppose you deposit $100 i a bak that pays 10% per year.