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ventaSo, sums. I can, broadly speaking, do sums. I have a degree in maths.
However, interest rate calculations have always baffled me. Sure, if you ask me to calculate 3 months compound interest at a monthly rate of x% I know what to do. However, when it comes to real examples of mortgages and credit cards, I can't work out what the sum I need to do is. I'm still slightly baffled about the interest charged me when I was a day late paying my credit card off in full in March.
Today, the BBC carried a story about a loanshark. It includes the following statement about someone who borrowed £1000:
"...to pay £49 a week over 60 weeks, making the total amount he had to
repay £2,940 at 917% APR."
Now, if we approximate 60 weeks to a year, then surely that's an annual interest rate of no more than 294%. The quoted APR isn't even in vaguely the right ballpark.
So... have I completely failed to understand APR ? (Wikipedia's page on the subject didn't really help with the definition.) Or is the BBC publishing unmitigated wank in the name of investigative journalism ?
Edit It turns out I'd failed to understand APR, and the BBC is cleared in this instance.
However, interest rate calculations have always baffled me. Sure, if you ask me to calculate 3 months compound interest at a monthly rate of x% I know what to do. However, when it comes to real examples of mortgages and credit cards, I can't work out what the sum I need to do is. I'm still slightly baffled about the interest charged me when I was a day late paying my credit card off in full in March.
Today, the BBC carried a story about a loanshark. It includes the following statement about someone who borrowed £1000:
"...to pay £49 a week over 60 weeks, making the total amount he had to
repay £2,940 at 917% APR."
Now, if we approximate 60 weeks to a year, then surely that's an annual interest rate of no more than 294%. The quoted APR isn't even in vaguely the right ballpark.
So... have I completely failed to understand APR ? (Wikipedia's page on the subject didn't really help with the definition.) Or is the BBC publishing unmitigated wank in the name of investigative journalism ?
Edit It turns out I'd failed to understand APR, and the BBC is cleared in this instance.
no subject
Date: 2008-07-29 10:06 am (UTC)I used excel and applied weekly interest after each payment and found that an interest rate of 4.83% would have it paid off completely after 60 payments and then doing the ^52 calculation you did above I got ~1165% APR. I too am confused by the 917% interest rate... I may give it more thought though. :)