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Chris72

Member

Registered: 2007-06-11

Posts: 1

Calculating r in Comparison Rates calculation - Finance : )

Hi how you going... I am totally purplexed by the Consumer Credit Code in Australia which legislates that financiers must calculate an APR or Comparison Rate for a loan and was hoping someone out there might be able to help me understand it so I can put it in to Excel and have an on-going calculator...

Here goes:

The comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency... it is given by the following formula:

i = n x r x 100%

where:

'n' is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is ledd than 12 months), except that
             i) if repayments are to be made weekly or fortnightly - n is to be 52.18 or 26.09 respectively; and
            ii) if the contract does not provide for a constant interval between repayments, 'n 'is to be derived from the interval selected for the purposes of the definition of 'j' mentioned below.

'r' is the solution of the following -

See Image uploaded below

where -

'j' is the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected as the interval of time

't' is the time measured as a multiple of the interval between contractual repayments (or other interval so selected) that will elapse between the time when the first amount of credit is provided and the time when the last repayment is to be made under the credit contract

'Aj' is the amount of credit to be provided under the credit contract at time 'j' (the value of 'j' for the provision of the first amount of credit is taken to be zero)

'Rj' is the repayment to be made at time j

'Cj' is the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj.

There may even be a gratuitous hug if you can help me solve it

Thank you,

Chris...

Last edited by Chris72 (2007-06-11 07:16:54)