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I am having following parameters:

loan_value = 20000
Annual rate = 2.9%
other fees = 500
periods of repayment = 24 (2 years, each month)
additional fees per month = 2

now, given the formula:

EIR = loan_value * (1+Annual rate/24) power (periods of repayment) I get EIR of 2.94%, where did my bank get 5.78% ??? I would really appreciate the explanation.

filtertips
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  • It is obvious that your formula cannot work due the fees you pay. – callculus42 Apr 25 '22 at 15:36
  • Why Annual rate/24 rather than divide by the number of months in a year? And If EIR is in a sense annual, why not raise to the power of $12$? – Henry Apr 25 '22 at 15:37
  • @callculus42 O.K., but how to include fees if may I ask? I calculated how much I pay at the end and divided that with (loan_payment - fees) and I still didn't get the 5,578% – filtertips Apr 25 '22 at 15:51
  • @Henry but then EIR would be even lower, I want to know how my bank got 5.78% – filtertips Apr 25 '22 at 15:51
  • @filtertips It is much more difficult. Maybe the calculation can be comprehended by using an excel sheet. – callculus42 Apr 25 '22 at 16:01

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