RFM presents the annual discount rate that equates the sum of the present values of all amounts received from the loan relationship with the sum of the present values of all amounts, i.e. instalments and interest or annuities, commissions, protected …), which have been paid with this respect. Discounting is performed in a compound (conformal) method.
With Interest rate calculator you can solve the most simple to the most complex cases.
You will all agree that the price of money is defined by the time and the amount of getting the money and the time and the amount of the paying back money. The same is when being in role of a lender, investor or saver. Performance is subject to time and the amount of borrowing the money and the time and the amount of getting back the money lent.
How to fix the rate for money, which will contain everything?
The method is given by the following equation
|m||number of cash flows paid by the lender|
|j||sequence number for the cash flows paid by the lender (draw down)|
|aj||cash flow (drawdown) in period j|
|n||total number of cash flows paid by the borrower|
|k||sequence number of the cash flows paid by the borrower (repayment)|
|bk||cash flow (repayment) of period k|
|tj and tk||interval, expressed in fractions of a year between the date of the first cash flow and the date of cash flow j or k.|
(If your browser does not support HTML5 date field, enter the date in the form yyyy-mm-dd)
- Payments – decimal point is point (.)
- Repayments – decimal point is point (.)
- Description (optional)