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What, something like loan amount x interest rate % divided by days in the year = daily interest rate
I am not an accountant, so have probably got it all wrong.
Dave
Perhaps you should ask your bank, though I doubt they could work it out for you acurately and I have to ask, why would you need to?
Dave
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
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
Indeed! Good point.
So for the purposes of being 100% accurate, how can you calculate that then?
FV=PV(1+i)^n
FV-PV=interest accrued.
Boods
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.