42
votes
Accepted
Which mortgage should I pay off first? Same interest rate and mortgage length
You haven't accounted for what happens when the small loan is completely paid off.
Seven years into the aggressive payoff schedule you need to shift all original principal and interest payment and the ...
- 143k
11
votes
Which mortgage should I pay off first? Same interest rate and mortgage length
However, I just started thinking, and because of the nature of
amortized loans, I'm obviously paying quite a lot of interest in the
beginning....
This is a common point of confusion, the portion of ...
- 70.8k
4
votes
Accepted
How to calculate the very last payment when repaying a debt?
We can use the formula for the FV for the months where we pay the full amount, then calculate the interest on that to calculate the last payment.
In excel, that would be
= FV( rate, floor(nper, 1), ...
- 151
3
votes
Accepted
Confusion with payment calculation for fixed payments on fixed interest loan
It's simply how interest rates are quoted - they're quoted as an annualized rate but they are applied monthly, hence the X/12%. It does not mean that you accrue exactly X% over the year if you do not ...
- 140k
3
votes
Accepted
Monthly Rate vs Continuously Compounded Rate
(a) 100,000 * (1+1%)^36 = 143,076.878
I am not sure if I get (a) correctly because I see that some people calculate it as 100,000 * (1+1%*36)
If you are earning 1% each month on your balance, and the ...
- 143k
2
votes
How to calculate the very last payment when repaying a debt?
What is the easiest way to calculate the last payment of a loan in such cases?
Work out an amortization table in Excel. You need five columns:
Month Pmt Int Prin Bal
And work out how ...
- 140k
2
votes
Accepted
If APY factors compounding (while APR doesn't), shouldn't APY always be higher than APR?
Why is this lower?
Does the APY for amortization schedules work differently (because
interest is front-loaded or whatever)? But since the loan only lasts
one year, how would that even make a ...
- 70.8k
2
votes
Accepted
Continuous compounding only makes big difference at nominally 5+ %
Your math checks out.
In practice, however, 'continuous' compounding is basically used for theoretical purposes only, and only as a shorthand for financial planners and the like. (The math involved in ...
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1
vote
Continuous compounding only makes big difference at nominally 5+ %
Re. "Does this look reasonable?"
Various expressions of interest should not produce different results if used properly. Nominal interest rates for various compounding periods can be ...
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1
vote
Continuous compounding only makes big difference at nominally 5+ %
The discrepancy comes from how the interest rate for the sub period is calculated. If your annual interest rate is 6% most people would calculate the monthly rate as 6%/12 = 0.5%. Mathematical that's ...
- 8,592
1
vote
Accepted
How to calculate a mixed interest rate?
In the absence of intermediate valuations use the internal rate of return calculation which only requires cash flows.
https://en.wikipedia.org/wiki/Rate_of_return#Internal_rate_of_return
equating the ...
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1
vote
How to calculate the very last payment when repaying a debt?
OP: What is the easiest way to calculate the last payment of a loan in such cases?
This method does not require Excel functions or an amortisation table.
As explained below, it makes use of 2 formulae:...
- 9,927
1
vote
Formula for continuously increasing interest rate
Although a continuously increasing rate would be an unlikely practical scenario the question is answered here for mathematical fun.
Here is a simple example, compounding z over 4 years with interest ...
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