Any Mathematicians or Actuaries here ?

NickX

fermi wrote: »

Thanks Fermi,

I had actually got to this on my back of an envolope working, but was trying to manipulate the algebra to get a formula for i (Rate of Interest).

I had tried calculus and logs and exponents, but was just getting confused.

Looks like the iterative solution is the only way.

bigbloke45

If it's just the figures you stated (i.e no upfront charge for finance etc.), and the interest is payable from day one, then the interest rate is 23.63%.

If interest is payable monthly in arrears, then the rate is 22.67%.

Please note that there is NO formula for yield (i.e. interest). These answers are achieved by "iteration".

NickX

bigbloke45 wrote: »

Please note that there is NO formula for yield (i.e. interest). These answers are achieved by "iteration".

Thanks, I think that is the conclusion being reached. Iteration is the only way.

However, I think given the APR, the amount of the Loan and the Monthly Repayment, it is possible to work out precisely how many payments would be required.

Bismarck

wow...that looks like fun...was wondering what to do with my weekend!

so much light reading...!

bert&ernie

NickX wrote: »

However, how on earth this was done before the advent of computers is beyond me.

I don't think it was done. The only real value of the APR is as a value to compare different products - its a regulatory requirement rather than a business one.

bigbloke45

NickX, there IS a formula for TERM, but this assumes that you know your yield i.e APR.

What exactly is your objective? Are you trying to compare different loan offers or just calculate an APR? If it's the latter, then surely it would just be better to look at the monthly repayment? I say this only because APR's as about as useful as a fart in a spacesuit! They have been designed by intellectuals who seem to have no idea about what happens in the real world.

Good luck with your quest!

NickX

bigbloke45 wrote: »

NickX, there IS a formula for TERM, but this assumes that you know your yield i.e APR.

What exactly is your objective? Are you trying to compare different loan offers or just calculate an APR?

LOL well my objective was just to refresh my mind on the mathematics behind APR and loan calculations. I am sure I did it when studying A-level Statistics, but that was **cough** **cough** 20 years ago

I have worked out the formula for the TERM on the basis that you know the yield, the Total Amount borrowed and the monthly Payment. It still uses logarithms though, so specialist knowledge is required.

I'm not quite sad enough to dig out any old textbooks just yet.

But yes, it just goes to prove how much use theoretical algebra is in the real world

Thanks for everyone's input anyway.

bigbloke45

NickX, have you got access to MS Office? All of the formulae you need are on there. Failing that Open Office will do.

But I suspect that you are more interested in enjoying the Maths, which is cool.

Also, have you thought about buying a financial calculator? You can get some good ones from Hewlett Packard AND, of course, the the instruction manuals have the formulae in them.

Good luck!

LongTermLurker

What exactly is your objective?

This has got nothing to do with stoozing beer money again has it Nick? :rolleyes:

NickX

LongTermLurker wrote: »

This has got nothing to do with stoozing beer money again has it Nick? :rolleyes:

LOL No, but once you have spent some time on this, the beer becomes a very attractive alternative pastime