Finding interest

[Joseph N.]

I'm sure this must be easy to do, but I've reviewed all of the
interest-related functions and MS's help pages, tried a few out, and a
workable solution keeps evading me. I'd appreciate any insight into
the following:

I need to find the dollar amount resulting at a specific time when
principal has earned a simple rate of interest. For example: Jane
Doe receives judgment against John Doe for $1,000, and the post-
judgment rate is 5%. John does not pay Jane until four months after
the judgment has been entered. How do I find the amount of interest
that John has to pay, which has accumulated at 5% over the four months
that he did not pay Jane?

 

[Guest]

Joseph

I'm not sure about this, but I think this is the way.

0.05 interest is 0.004166667 per calander month (.05/12). You could simply
multiply this by 4 and then muliply the result by the principal 1000 to give
you the interest and then add this to the principal giving 1016.666667

However, this understates the amount somewhat and if the late payment drags
on for years you need to use compound interest.

Interest owed ==(1+B2/12)^B4*B3 where B2 contains the annual interest rate,
B4 contains the months late and B3 contains the principal.

Regards
Peter

 

[joeu2004]

I need to find the dollar amount resulting at a specific time when
principal has earned a simple rate of interest. For example: Jane
Doe receives judgment against John Doe for $1,000, and the post-
judgment rate is 5%. John does not pay Jane until four months after
the judgment has been entered. How do I find the amount of interest
that John has to pay, which has accumulated at 5% over the four months
that he did not pay Jane?

You say "simple rate of interest". Do you mean that interest does not
compound?

If so, then the following might suffice:

=1000*5%*4/12

You could be more precise by computing daily interest, as follows:

=1000*5%*(A2-A1)/365

where A1 and A1 are the judgment date and the payment date
respectively.

If you mean that interest compounds at the stated nominal rate (5%),
you might compute accumulated interest as follows:

=fv(5%/365, A2-A1, 0, -1000) - 1000

 

[Dana DeLouis]

Maybe one way...

=FV(5%/12,4,0,-1000)

$1,016.77

 

[Joseph N.]

=FV(5%/12,4,0,-1000)

Thanks everyone. One remaining question: Why is the principal a
negative number in this argument?

 

[JE McGimpsey]

=FV(5%/12,4,0,-1000)

Thanks everyone. One remaining question: Why is the principal a
negative number in this argument?

Think of it as Cash Flow direction.

Using the above formula, you might be spending (outgo, -) $1000 to buy
an asset that will return (income, +) $1,016.77 in 4 months.