What's the Effective Interest formula used by this loan calculator?
I used a loan calculator which gives an effective rate of 80.781 whereas wikipedia en.wikipedia.org/wiki/Annual_percentage_rate gives a rate of 49% for these parameters:
borrowed: 100
fees: 10
rate: 5% per month (60% per year)
amortization table is:
t1 -> 5.50 6.91 103.09
t2 -> 5.15 7.26 95.83
etc.
The rate of wikipedia is much lower than the annual nominal rate of 60% so it's misleading the consumer somehow whereas 80.80 seems closer to reflect this costfull loan.
I don't care about who is right or wrong, I know how wikipedia calculates its rate, I cannot find out how the software calculates it. So my question is: can you deduce their formula ? Excel function equivalents would be fine for the answer.
(1)1 Comments
Sorted by latest first Latest Oldest Best
First - it's a different process for anyone to answer a straight question than to try to figure out someone else's potentially wrong answer.
A nominal 60% will result in an APR of 79.6%, regardless of the numbers involved.
You show the beginning of an amortization table that is written as if one borrowed 0, and paid it back over 12 months or so it appears to me. This is not how I'd create the APR for the scenario you propose. Present value of , but use the payment on the full 0. Or if you actually get the 0 but owe 0, then use the payment on the 0 but PV of 0. This should bring the monthly rate to 8.74% from 5%.
If this isn't clear, ask a follow up and I'll edit response.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2026 All Rights reserved.