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Monthly interest Rate is 1.5% and the factor for 24 is .5666667

Principal loan is Php218,009.78 payable in 24 equal monthly installments of Php12,353.89. Qouted Interest rate per month is 1.5%. I am wondering how they got the factor of 0.5666667. What is the formula to get the factor? It seems the effective interest is so high.

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The actual interest rate is 36%. (1.5*24). Where did you get the 0.5666667 from 24/36 is 0.6666667.



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Posted on Dec 10, 2008

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If I know how much the payment is and the length of the loan how can I calculate the percentage I am paying?


A=P((1-(1+r)^(-n))/r, where A is the present value of the annuity, or the amount of the loan, P is the periodic payment, r is the interest rate per period, and n is the number of periods. In this case, I assume the payments are monthly, so n would be 36. You mentioned that you already have A and P. However, solving for r algebraically is not that easy because it is in two places on the right hand side. However, you can make a table and put in interest rates to make both sides equal. Remember to multiply this answer by 12 to get the annual interest rate.

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0.011 2959.42 2766.07 -193.35
0.012 2909.33 2766.07 -143.26
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You can see from the chart that the value of r of 0.015 makes the difference 0, so the periodic interest rate is 0.015 or 1.5%. We need to annualize this by multiplying by 12 and we get an annual interest rate of 18%.

Good luck,

Paul






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