...FV=PV(1+i)^n ? Given the following variables:
Principal: $5000
Interest Rate: 16% per annum
Length of loan: 1 year
The monthly repayments from the compound interest formula FV=PV(1+i)^n (FV = final value, PV = principal, i = interest, n = number of periods) is $483.30 per month.
However when I use the bank's calculator:
http://www.commbank.com.au/tools/pl_calculators/aspcalculator/repayments.asp
it says the loan repayment would be $453.65.
Also, when I put the monthly repayments of $483.33 in Microsoft Excel's RATE() function as follows:
=RATE(12,-G6,B6)*12
I get an interest rate of 28%
Can someone please explain how the bank differs from the standard formula and how to calculate an interest rate like a bank would?
My apologies, with the Excel formula I left it as cell references. It should read:
=RATE(12,-483.33,5000)*12
Principal: $5000
Interest Rate: 16% per annum
Length of loan: 1 year
The monthly repayments from the compound interest formula FV=PV(1+i)^n (FV = final value, PV = principal, i = interest, n = number of periods) is $483.30 per month.
However when I use the bank's calculator:
http://www.commbank.com.au/tools/pl_calculators/aspcalculator/repayments.asp
it says the loan repayment would be $453.65.
Also, when I put the monthly repayments of $483.33 in Microsoft Excel's RATE() function as follows:
=RATE(12,-G6,B6)*12
I get an interest rate of 28%
Can someone please explain how the bank differs from the standard formula and how to calculate an interest rate like a bank would?
My apologies, with the Excel formula I left it as cell references. It should read:
=RATE(12,-483.33,5000)*12