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Definition of Effective Interest Rate

Definition of Effective Interest Rate

Definition of Effective Interest Rate

010381.gif010411.gif010382.gif010383.gif

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BIR = the MONTHLY basic interest rate from the table

NIR = the ANNUAL interest rate from the table

ZO = The annual interest rate calculated using the monthly basic interest rate that has been calculated at annualised level and the nominal interest rate. Below you can see rounding of the monthly interest rate, that is, calculating the total annual interest rate to two decimal points. Next use the rounded annual interest rate (it is suitable for calculating default interest).

Interest = principal (factor - 1)

Below you can see the rounded default interest (ZO):

002970.gif

002971.gif

 

000001.gif The factor is displayed rounded up to 6 decimal points, but this does not mean that calculations will be performed using the rounded factor value!!

The nominal interest rate is displayed rounded up to 2 decimal points, but this does not mean that calculations will be performed using the rounded value!!
000001.gif Above we selected rounding of the monthly interest rate in the interest rate table which is more suitable for default interest! To perform calculations using the unrounded interest rate see Rounded and Unrounded Monthly Interest Rates!

 

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