4 ms·
> beware though, Wikipedia is bound to lead to errors by defining the monthly rate as yearly rate / 12 Looks like all the calculators do that as well. What's t
by quelltext 3y ago
> beware though, Wikipedia is bound to lead to errors by defining the monthly rate as yearly rate / 12
Looks like all the calculators do that as well. What's the right way?
- alex_young 3y agoMy mortgage company seems to use the same formula.
- sophiebits 3y agoI assume to take compounding into account, you want the 12th root. Instead of 12% → 1%, 1.12^(1/12) gives around 0.95%.
- jskherman 3y agoThe effective interest rate should be calculated and then converted to the monthly rate: $$ \left( 1 + \frac{i_a}{n_a} \right)^{n_a} = \left( 1 + \frac{i_b}{n_b} \right)^{n_b} = \left( 1 + \frac{i_{\text{annual}} }{1} \right)^{1} $$ https://www.investopedia.com/terms/e/effectiveinterest.asp https://www.investopedia.com/terms/e/effectiveinterest.asp
- neilkk 3y agoMy mortgage company charges interest based on the number of days in the month divided by 365. I have replicated their calculation like this. I'm not sure what they do in leap years - there are at least 3 distinct approaches.
- deleted 3y ago[deleted]
- contravariant 3y agoIt could be correct, it just depends. Also according to the comments banks do all kinds of weird things.
- beefield 3y agoThis is a bit of a rabbit hole. The right way is whatever is agreed, and there are many ways to agree it. https://en.m.wikipedia.org/wiki/Day_count_convention https://en.m.wikipedia.org/wiki/Day_count_convention