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Math Help - Annual Compound Interest

  1. #1
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    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?
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  2. #2
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    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.
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  3. #3
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    Quote Originally Posted by sabunabu View Post
    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?
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