Compound interest calcs

[Michael S. Montoya]

I need to calculate interest (late charges) similar to the way credit cards
do. Payments are not fixed (in either payment amounts or payment dates),
and interest is compounded daily at a rate of 10%/year.

I have not been able to find a formula to do this as most of them talk about
annuities and fixed payments.

Can someone help me.

Micahael S. Montoya

 

[Michael S. Montoya]

This is great! It is the best answer I have found so far. The only issue I
have with this is from what I understand you are not suppose to charge
Interest on Interest charges, so I am guessing I have to keep the principle
balance seperate from the interest balance. This would not be an issue
except for the question of what ratio of the payment goes to
principle/interest?

 

[Tushar Mehta]

I don't know of any financial institution that issues a credit card and
doesn't charge interest on interest *daily*.

You can do a simple test to see how much you are really paying on a
loan structured in that manner.

B C
2 Annual rate 0.2
3 Daily rate 0.000547945
4
5 Principal 100
6
7 Actual rate 0.221335858
8 %difference 10.67%

where the formulas are
B C
2 Annual rate 0.2
3 Daily rate =C2/365
4
5 Principal 100
6
7 Actual rate =(C5*(1+C3)^365-C5)/C5
8 %difference =(C7-C2)/C2


--
Regards,

Tushar Mehta, MS MVP -- Excel
www.tushar-mehta.com
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