Dahu

03-20-2009, 12:56 PM

We've been offered a loan, fixed for the next 10 years.

Annual interest rate quoted is 4.6%.

Payments to be made monthly.

So what is the standard way of calculating the monthly interest rate to be applied? Is it simply 0.046/12 = 0.3833%?

Or should it be (1.046)^(1/12) -1 = 0.3755%?

The bank has calculated the repayments based on the first method, is this standard in the industry? I would have though the second method would be more correct.

Annual interest rate quoted is 4.6%.

Payments to be made monthly.

So what is the standard way of calculating the monthly interest rate to be applied? Is it simply 0.046/12 = 0.3833%?

Or should it be (1.046)^(1/12) -1 = 0.3755%?

The bank has calculated the repayments based on the first method, is this standard in the industry? I would have though the second method would be more correct.