Some details on Balloon Payments...

[creeper]

But why quote it then as an annual rate? B2 is most certainly not the annual rate if you're getting charged B2/12 monthly.

Then let's rename it to nominal annual interest rate that the banks display to sucker you into thinking you are only paying that amount of interest a year.

B2 is the quoted interest rate, or nominal rate. Because the PMT calculation works out monthly installments, it in effect calculates the effective interest (compounded interest). If the period was yearly, then you might have done the effective interest calculation.

 

[Jehosefat]

But why quote it then as an annual rate? B2 is most certainly not the annual rate if you're getting charged B2/12 monthly.

It may not be the effective annual rate but quoting interest rates as nominal annual rate is standard practise. The most common being NACM (nominal annual compounded monthly) but there are definitely others that are used too like NACQ (quarterly), NACD (daily) or NACC (continuously, this is mainly used for option pricing afaik)

 

[Garson007]

Then let's rename it to nominal annual interest rate that the banks display to sucker you into thinking you are only paying that amount of interest a year.

Sounds accurate.

Well, imho it's bull****. But it is what it is. What do banks use for fixed deposits and savings accounts? Effective rate?

Curiosity: Repo rate is an effective rate, right? As are bond coupon rates?

 

[creeper]

Sounds accurate.

Well, imho it's bull****. But it is what it is. What do banks use for fixed deposits and savings accounts? Effective rate?

Curiosity: Repo rate is an effective rate, right? As are bond coupon rates?

Good question. Repo rate, I suspect, is also nominal. Bond rates are nominal, because bonds work differently. Bonds don't compound. It pays out a set amount yearly. I have R10000 of 5 year bonds at 10%, they pay out R10000x10% = R1000 yearly for 5 years, then they pay back your R10000 at the end of the 5 years.

 

[Jehosefat]

Sounds accurate.

Well, imho it's bull****. But it is what it is. What do banks use for fixed deposits and savings accounts? Effective rate?

Curiosity: Repo rate is an effective rate, right? As are bond coupon rates?

Afaik fixed deposits are nominal rates compounded at whatever the fixed deposit term is.

Bond coupon rates are always nominal however, as creeper pointed out, its not possible to calculate an effective rate on coupon-bearing bonds (yield-to-maturity is an estimate of what the effective rate is given some assumptions about reinvestment rates).

I'm not sure about the repo rate although I suspect that it is a nominal rate.

 

[Debeer165]

Apologies. Things started happening, couldn't work on it yesterday or today. Tomorrow is also out, hope to have it running Thursday.

Current version, without balloon payment support is available via PM request as it is uploaded to my personal Drive folder as non-editable. Download and save to use.