Calculate payments based on APR

[Kenneth Brody]

Robert T. Repko (R Squared Consultants) wrote:
> Believe it or not at 4/13/2009 08:23 PM, Kenneth Brody said:
[... 365 daily payments vs 12 monthly payments ...]
> That's what I thought but when I ran it my answer was different by 
> .315/month, 89.74 vs. 89.425
[...]
> eh = TVM_PMT(pi,ep,ez,"0") = $2.94 daily payment
> 
> "2.94" * "365" / "12" = 89.425
> 
> 2.94 is daily payment, mult. by 365 for annual payment, divide by 12 
> for monthly payment = 89.425.  That's a difference of ~ 
> $.315/month.  Maybe I'm wrong but I wouldn't expect that much 
> difference between daily vs. monthly calculations, and I would expect 
> the daily calculations to be higher than the monthly calculations not lower. 

Why would you expect to pay more if you pay it faster?  (And the difference 
is about 1/3 of 1%.)

Try a different angle, and you'll see this is correct.

You agree that 12 monthly payments on $1,000 at 13.9% was 89.74 each, 
correct?  (That's what filePro and your calculator both came up with.)

That's a total of $1076.88 in payments.  However, if you were to make a 
single yearly payment, you would pay $1139.00, correct?  By paying it in 
more payments over the same time, the total payment is less.

So, making 365 daily payments of $2.94 instead of 12 monthly payments of 
$89.74 means you pay a total of $1073.10, for a whopping $3.78 savings.

-- 
Kenneth Brody