Daily interest calculation

[Jlynno]

Hi

How can I calculate the interest due for a loan that has a number o
days betweent the contract date and first payment date. For example:


PV = 12,284.33
I = 4.69
# days = 45

I know how to calculate interest for a term such as 60 months but a
stuck on the amount due up to the first payment!!!

Can anyone rescue me

 

[Myrna Larson]

Assuming the APR is 4.69, and you don't have to worry about compounding,

=12284.33*0.0469*45/365

 

[Norman Harker]

Hi Jlynno!

Myrna's approach assumes simple interest.

To allow for compound interest you need to provide more data on the
interest rate.

If it is the customary APR12 (aka Nominal compounded monthly), then
you have to convert this to the daily effective equivalent.

=(1+0.049/12)^(12/365)-1
Returns: 0.0133982207246364%

You can then use that rate in the standard compounding formula:

=12284.33*((1+0.0133982207246364%)^45-1)
74.2834076674653

However, there are two other common interest quotes that might apply:

Annual nominal compounded daily. For that one your daily effective
rate is:

=4.69%/365
Returns: 0.0128493150684932%

Annual effective. For that your daily effective rate is:

=(1+0.049)^(1/365)-1
Returns: 0.0131069765368252%

You can use the FV function to work out the accumulated amount
(deducting the amount invested from the answer to get the interest
component). If you do use the FV function, you must still use the
effective rate that matches the period of time that is "counted" by
the NPER argument and you must also input or interpret your results
using the sign convention that Excel uses.)