Formula to compute total daily interest?
- Thread starter dwv
- Start date
And then for the next day you have to include that daily interest to the total loan and compute another daily interest rate. if i have 20 days, how will I easily come up with the answer (aside from using an excel sheet)?
I bought an IP recently and instead of getting the deposit from a LOC, I used the a redraw account (which I haven't used for any other purpose, btw).
I was just thinking, for the interest of the deposit to be tax deductible, I should firstly know what the actual interest is. But looking my statement, I don't think I can deduce that. So I was thinking I should create a spreadsheet and keep track of the monthly interest it would generate so when it's to go to the accountant, I'll have it all ready. If the rate changes in the middle of a month, I should also be able to compute it.
Or, am I doing it all wrong?
without the formula, you can just do the basic calculations 20 times but this is not necessary.
If you have a financial calculator (I use a HP 10BII) then you can find the future value of the amount and subtract the present value, which will leave the interest component accrued. You need to make sure you enter the correct number of periods, and adjust the interest rate to reflect the amount of days you require.
FV=PV(1+i)^n
FV-PV=interest accrued.
Hope this doesnt confuse you too much!
Boods
without the formula, you can just do the basic calculations 20 times but this is not necessary.
If you have a financial calculator (I use a HP 10BII) then you can find the future value of the amount and subtract the present value, which will leave the interest component accrued. You need to make sure you enter the correct number of periods, and adjust the interest rate to reflect the amount of days you require.
FV=PV(1+i)^n
FV-PV=interest accrued.
Hope this doesnt confuse you too much!
Boods
I'm using the scientific calculator in Windows... will it suffice? is "i" the interest rate? and "n" number of days? "^" is exponential? So for example, if $28 is my daily interest and 5.21% is the rate for 20 days,
28(1.0521)^20 is the formula? It doesn't seem right to me or am I just using the calculator incorrectly... I should have taken those accounting courses!
A basic calculator will suffice. Daily interest rate 0.0521/365. So if you need to calculate your interest for 20 days, then its (0.0521/365) x 20days x mortgage amount.
sort of...
If you are compounding daily as banks do, then you will be out slightly, because you have not taken into account the previous period's interest ie the days before.
Honestly though, for the purpose of this exercise it would'nt make a hell of a lot of a difference.
Boods
sort of...
If you are compounding daily as banks do, then you will be out slightly, because you have not taken into account the previous period's interest ie the days before.
Honestly though, for the purpose of this exercise it would'nt make a hell of a lot of a difference.
Boods
Indeed! Good point.
So for the purposes of being 100% accurate, how can you calculate that then?
I've asked an accounting student about this and he said I first have to divide the rate i by 365 days. That seems to have worked.
Yeah!
That's right.
The formula is FV=PV(1+i)^n
In your case the interest of 0.0521 is compounded daily. Therefore i=0.0521/365 which is 0.000143. Make sure the 'n' value is 20.
So in your case: FV=PV(1+0.000143)^20
If your present value was $10,000 for example. After twenty days it would be $10,028.64 compounding daily at 5.21% pa. Remember to minus the FV from your new PV to get the interest only. Let me know if you have anymore trouble.
That's right.
The formula is FV=PV(1+i)^n
In your case the interest of 0.0521 is compounded daily. Therefore i=0.0521/365 which is 0.000143. Make sure the 'n' value is 20.
So in your case: FV=PV(1+0.000143)^20
If your present value was $10,000 for example. After twenty days it would be $10,028.64 compounding daily at 5.21% pa. Remember to minus the FV from your new PV to get the interest only. Let me know if you have anymore trouble.
dwv, I've just had a think about your goal.....a couple of things I don't get.
When you say you used a redraw facility as a source for the deposit on IP2, are you referring to a redraw facility from another IP (IP1) from which you extracted cash, and paid the vendor of IP2 at settlement?
And it is the additional interest you are paying on the IP1 loan that you are trying to now calculate?????
anyway, here's a spreadsheet I slapped up to try and get a realistic figure.
Using the formula given earlier in the thread has some disadvantages.
- It doesn't accommodate monthly pmts of interest. The formula instead assumes you make one interest pmt on the last day, and all the interest has been compounded until that day.
- Nor does it accommodate rate changes and extra payments you might make to reduce principal or prepay interest.
When you say you used a redraw facility as a source for the deposit on IP2, are you referring to a redraw facility from another IP (IP1) from which you extracted cash, and paid the vendor of IP2 at settlement?
And it is the additional interest you are paying on the IP1 loan that you are trying to now calculate?????
anyway, here's a spreadsheet I slapped up to try and get a realistic figure.
Using the formula given earlier in the thread has some disadvantages.
- It doesn't accommodate monthly pmts of interest. The formula instead assumes you make one interest pmt on the last day, and all the interest has been compounded until that day.
- Nor does it accommodate rate changes and extra payments you might make to reduce principal or prepay interest.
