On Dec 2, 12:29 pm, "Fred Smith" wrote:
Suppose your annual interest rate is 6%. Your compounded
quarterly interest rate is therefore 1.5%. If you borrowed $100,
then one quarter later, you would owe $101.50.

Doesn't that analysis assume that the principal remains at $100 for
the entire quarter?

Doesn't the fact that we are making monthly payments and interest is
calculated daily change your assumption?

Moreover, are you assuming a constant payment amount for the entire
term of the loan? ("nper" in your formula?) Is that a valid
assumption for this type of loan?

I don't know. But a google search for "define: capitalization"
indicates that the term means that the unpaid interest is added to the
principal, and the payment "may" change.

If the payment does not change, I ass-u-me that means that the balloon
payment increases when the loan matures. But I have trouble with that
interpretation.

Whadaya think?


----- original posting -----

On Dec 2, 12:29*pm, "Fred Smith" wrote:
Right now, you have interest compounded quarterly. As you state, the PMT
function (and, in fact, all financial functions) require the payment and
interest rate be for the same period. Therefore, you need to convert your
interest rate to a compounded monthly rate.

Suppose your annual interest rate is 6%. Your compounded quarterly interest
rate is therefore 1.5%. If you borrowed $100, then one quarter later, you
would owe $101.50. So the question that needs to be answered is: what
monthly interest rate turns $100 into $101.50 after three months? The Rate
function will answer this, as in:

=rate(3,0,100,-101.50)
=0.498%

Use this in your PMT function, as in:

=pmt(rate(3,0,100,-101.50),nper,pv,fv,type)

Regards,
Fred.

"Beth" wrote in message

...



Hello

Is there a function I can use in Excel to calculate the payment on a
mortgage where;

1. Interest is calculated daily but capitalised quarterly
2. Payments are made monthly

I have used the PMT function but it does not take into account that the
interest is daily.

Any help would be appreciated.
Thank you- Hide quoted text -

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