My Math Forum Financial Maths Problem

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May 5th, 2014, 11:56 AM   #11
Math Team

Joined: Oct 2011

Posts: 14,597
Thanks: 1038

Quote:
 Originally Posted by Marko1011 But the APR is 5%, so the equivalent monthly rate is ((1.05)^(1/12) - 1)(100), not .05/12
the montly factor by which the outstanding balance is multiplied
to get the month's interest is .05/12 = .00416666.....

The resulting effective annual interest rate = (1 + .05/12)^12 - 1 = .051162...
or ~5.1162%

Here's how it works (Bank statement format):
Code:
MONTH INTEREST       BALANCE
0                          10,000.00
1           41.67       10,041.67
2           41.84       10,083.51
...
11          43.44       10,468.01
12          43.61       10,511.62  : 5.1162%
Anyway, does not "really" apply to your problem, since the interest
is PAID each month along with an extra 300.
The 1st payment is 1250 + 300 = 1550
The 1000th payment is 1.25 + 300 = 301.25

 May 5th, 2014, 11:32 PM #12 Senior Member   Joined: Apr 2014 From: UK Posts: 965 Thanks: 342 I clearly wasn't thinking straight, the calculator I used worked on a constant payment amount. I think I agree with Denis, the monthly rate is 0.05/12, that seems to be how the banks work it, the scumbags, lol.
 May 6th, 2014, 06:08 AM #13 Math Team   Joined: Oct 2011 From: Ottawa Ontario, Canada Posts: 14,597 Thanks: 1038 It's easy enough to "see"; 300 to principal HAS TO mean a payment that exceeds the month's interest by 300: Code: MONTH PAYMENT INTEREST BALANCE 0 300,000.00 1 1,550.00 1,250.00 299,700.00 2 1,548.75 1,248.75 299,400.00 3 1,547.50 1,247.50 299,100.00 ...and so on to month#1000 The whole thing is really silly...and has nothing to do with usual financial formulas...

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