# Annual Compound Interest

• Apr 7th 2011, 11:43 AM
sabunabu
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?
• Apr 12th 2011, 03:23 AM
Carlow52
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.
• Apr 15th 2011, 07:45 AM
Wilmer
Quote:

Originally Posted by sabunabu
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?

Depends on how the "lender" uses "10% annually compounded".
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?