Let's say I want to borrow $1000 from a bank at an interest rate of 12% per year, for one year. The number of payments in this case is equal to 12 (one year * months per year) and the interest rate per period (month) would be 1% (12% / 12).
According to many calculators online:
the payment per period would be equal to $88.85, while the total interest at the end of the loan would be $66.19.
I also built my own spreadsheet in excel and confirmed these calculations.
I expect the bank to receive exactly $1120 at the end of the loan (1000 * 112%). At least not including inflation.
But the bank receives nominal price of $1066.19 (12 payments of $88.85), only 6.6% of total interest and it's less than 12%, and this is even not including inflation.
If the annual inflation is greater than 6.6%, the bank loses money.
Could you explain me where in my calculations I went wrong? Thanks!