Interest Rate Help
I think Ron was right in that the answer should be 5%.
Here's a different way to look at it.
Using the Loan Template, if we do not make extra payments, our cash flow
will be
-10000
+188.71 for 60 months.
Hence (3% guess)
=IRR(E1:E61,3%)*12
5.00%.
If we make extra payments, all this does is shorten the loan period.
From our cash perspective...
-10000
+688.71 (15 times)
+6.06 ( 1 time)
=IRR(A1:A17)*12
5.00%
So, basically, no change. Just a shorter payback period. I agree we Ron
that it might be the same 5%.
--
Dana DeLouis
"lawdoggy" wrote in message
ups.com...
Thanks to everyone who has replied. I guess this was not an easy
question.
Dana, your formula (answer) seems to make the most sense to me and
the interest should be a smaller amount than the original (I would
think).
On Sep 20, 7:49 am, "Dana DeLouis" wrote:
In Excel 2007, under New | Template, I pulled up the
"Loan Amortization Schedule" which has the option for an extra payment.
Total Interest was $336.77
We now that the answer should be < 5%.
=RATE(16,,-10000,10000+336.77,,5%)*12
2.49%
Now we plug this rate back in the loan template to check. It appears
reasonable if we change the loan period from 1 to 2 years. (can't do 16
months)
--
Dana DeLouis
Windows XP & Excel 2007
"lawdoggy" wrote in message
ups.com...
I need help with the formula for figuring out what the 'real' interest
rate is when you pay a loan off early. Example car loan:
$10,000 (borrowed) 5% @ 60 months, Total with interest is: 11,322.74
Now:
I do the same as above but apply an extra $500 to the principle each
month and pay off the loan in 16 months and only pay $336.75 in
interest. What is my new 'real' interest rate for this loan?
Thanks in advance for anyone who can help! mitch- Hide quoted text -
- Show quoted text -
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