reducable interest???? divide by 12 or 100???? (1 Viewer)

[poodoorfan]

reducible interest???? divide by 12 or 100????

with working out the interest in reducible interest do you divide the % interest by 12 then 100 or just 12????

i always thought 12 the 100 but on the sheets i've been doing they only divide by 12

 

[poodoorfan]

please............. someones gotta know this.

 

[Muzzaw]

Give me a question.

I have no idea what your talking about.

 

[Lois_87]

Your not making sense... What are you talking about?

 

[freakinout]

you have to didvide by 12 first.. for example.. if it was 24% pa then it would become 2% per month.... but wen working out the ineterest u cant use percentage it has to be a decimal... therfore u divide by 100 aswell.....

 

[Jayphen]

you have to didvide by 12 first.. for example.. if it was 24% pa then it would become 2% per month.... but wen working out the ineterest u cant use percentage it has to be a decimal... therfore u divide by 100 aswell.....

In that sense it shouldn't matter whether you divide by 12 or 100 first.

24% divided by 100 = 0.24
0.24 divided by 12 = 0.02, which is the correct figure

 

[poodoorfan]

its in a table and starts

borrows $50 000
interest 6% p.a
monthly repayment $650

on the 4th month you gotta work out the interest A, the new amount owing B, and the final amount owing after repayment C,

principal: $49198

gotta work out the rest from there only their answers work if you divide the ineterest by ONLY 12 for each month and i always thought you had to divide by 12 AND 100 to get it into decimal form.

so anyway you work out the right ineterest for $49 198 add it onto the principal then minus the reapyment for that month.

 

[poodoorfan]

i didn't mean which you divide first i meant do you divide it by both 12 AND 100 or just 12, and say you have 6% you divide it by 12 you get 0.5% thats what they're using to work it out they stop there and dont further divide it by 100%

sorry for not making much sense its really hard to explain.

 

[Jayphen]

It doesn't actually matter - the reason you would divide it by 100 again is so that you get a decimal rather than a percentage, which is much easier to use when you are doing your working. Using a calculator, it's easier to just put in 0.005 rather than 0.5% all the time.

 

[Casmira]

be careful with credit questions, they generall tell you the interest rate per day (such as 0.05%) but dont confuse that and just put in A=P(1+0.05)^n, remember to divide it by 100

to avoid getting confused, whatever percentage they give you (they never give decimal, only percentage) divide it by 100

 

[poodoorfan]

ok thanks but if i divide it by 100 im getting different answers to the textbooks, but if i only divide by 12 im getting the right answers, so im so confused

 

[poodoorfan]

so say you have 6% divide it by 12(for the months) you get 0.5, which is the number they're using to get their answer, if you divide by a further 100 you get 0.005 which gives you very wrong answers,

 

[Casmira]

with working out the interest in reducible interest do you divide the % interest by 12 then 100 or just 12????

i always thought 12 the 100 but on the sheets i've been doing they only divide by 12

so say you have 6% divide it by 12(for the months) you get 0.5, which is the number they're using to get their answer, if you divide by a further 100 you get 0.005 which gives you very wrong answers,

?! youve confused me, ill show you example

bob invests $2000 at 6% per annum, compounded monthly for 5 years, what is bobs investment going to be worth

1) 6% = 0.06 as decimal form
2) its compounded monthly, .'. 0.06/12 = 0.005
3) years is 12x5 (thats how many 'periods' of compounding will occur, 60)
4) A=2000(1+0.005)^60
bingo

 

[poodoorfan]

no no no sorry thats not what im talking about, im talking about "reducible interest" in it a table and you have to work out how much the repayments go down each month, you guys must have done it before this year or last even.

sorry but its the only topic that has this interest problem, and ive looked in different books and they all only use 12 but thats just cutting the % down not turning it inot a deciaml, sorry if im sounding crazy but yeah thanks for the help.

 

[Casmira]

ohh
yeh those tables only show that the interest is 12% then you got rows of a principal gradually reducing, the interest stays the same however you must apply it to the last payment

 

[poodoorfan]

yeah sorry im not the best at describing stuff, i put an example from another thread, but my Q still is why only divide by 12 (as they've done) why not 100????



Mr Chan takes out a $100,000 loan at 8%p.a. reducible interest over 25yrs. Interest is calculated and added on the first of each month. They make a payment of $775 each month.
Calculate
(a) the interest added after one month
(b) the balance owing after one month

answer
(a) I = ?
P = 100,000
r = 8% p.a (0.6666...% per month)
n = 1 month

I = 100,000 x 0.6666... x 1
I = $666.67

(b) $100,000 + $666.67 - $775
= $99891.67


as for a formula, you just use the I = Prn to work it out. Reducible interest basically means you are only charged interest on the amount still owing

 

[Casmira]

it cant be 0.6666 per month because that means its 66.6%, its 0.08/12

thanks for the heaps up for reducable interest i didnt know that

 

[poodoorfan]

yeah this is what im talking about though 0.6666 is 8% divided by 12.

why isn't it divided by 100 and is this how it always goes for reducilbe interest???? just dividing the eg 8% by 12????