On Mar 9, 12:33 am, Joel wrote:
"bronxbabe" wrote:
I'm trying to insert the formula for the correct results below. Here's what
I have:
Int Rate Int. Amt
Total Principal No of days (L+1.5%)
69,000,000.00 182 7.46875 2,605,348.96
[....]
The L+1.5% is the Prime Interest Rate + 1.5%. Interest Rates are usually
base on the governments Prime Interest rate plus a fix percentage.

I assume "L" is LIBOR, the London Interbank Offered Rate Index. That
is not the same as the "Prime Rate" in the US, which is set by the
Federal Reserve.

I based these numbers on US interest rates which uses a 360 day banking
year. Your rate may be different if the calculations were based on a 365 day
year. Banks in US like 360 days becasue it divides evenly by 12 so each
month is 30 days.

You are correct that the original computation used a divisor of 360 --
although I believe you applied it incorrectly. See my response to the
OP's original posting.

However, I don't know of any US bank that (still) uses a 360-day year
when computing daily interest rates. And there is good reason to
believe that they would not. It is not in their "best interest" ;-).

Most US banks comply with FDIC regulations for the Truth In Savings
Act. Reg DD Sec 230.7 requires that compliant institutions "calculate
interest by use of a daily rate of at least 1/365 of the interest
rate". It does permit the use of 1/366 in leap years.

Of course, 1/360 is more than 1/365; so it would be compliant. But
Sec 230.7 also requires that compliant institutions "calculate
interest on the full amount of principal in an account for
__each_day__". If a bank used a daily rate of 1/360 of the annual
rate, it would pay more interest over some number of days than if the
bank used a daily rate of 1/365. It seems unlikely that a bank would
pay out more interest than the minimum required by law.