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i'm trying to validate a software Interest Calculation.

The defaults given are as followed.

Interval: Monthly
Nominal Annual Rate: 10%
Disbursal Amount: $500,000
Disbursal Date 01/01/2018
Payment Date 01/02/2018

So exactly one month between disbursal and payment

If the compute method is set to Normal (compound interest) The correct interest accrued is below

Interest Accrued for 1 month = 500,000 *.1 / 12
                             = 4166.67

Now if I set the compute method to be Canadian and set Canadian Basis to Semiannual I get an interest accrued value of $4,082.42.

I'm wondering how does one get $4082.42

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500000 ((1 + 0.1/2)^(1/6) - 1) = 4082.42

Canadian mortgages are compounded twice yearly. The interest rate, 10% is a nominal rate compounded semi-annually.

That is a lower rate than 10% nominal compounded monthly.

As you can see in the table here: Effective interest rate calculation

10% nominal compounded semi-annually =

    100 ((1 + 0.1/2)^2 - 1) = 10.25% effective annual interest

10% nominal compounded monthly =

    100 ((1 + 0.1/12)^12 - 1) = 10.4713% effective annual interest

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