Annual Compound Interest
I am trying to calculate an interest payment on an annually compounded loan of 10%. The loan was taken out on December 17, 2010 and matures on June 30, 2011. I would like to make a payment as of March 31, 2011, or 104 days into the 195 day loan. How do I calculate based on a 10% annually compounded loan?
By annually compounded I presume you mean that interest is only added to the loan on an annual basis, so if this were a 2 year loan of 100 then EOY1 interest is 10 so SOY2 balance is 110 and EOY2 balance is 121
[EOY is end of year, SOY is Start of year]
However, from an accounting perspective, using the accruals concept, the bank must accrue the interest on what basis?
Therein lies the answer to your question.
Depends on how the "lender" uses "10% annually compounded".
Originally Posted by sabunabu
Was there a "1 day" example given to you at the time of loan?
Was the total interest due Jun.30 (assuming no payments made) declared to you by the lender?