Simple rate
Rate (= r) can be solved, if capital (= k), interest rate (= i) and interest time (= t) are known.
Increased capital (K) is the capital plus the rate:
If the interest rate means annual interest, it is shortly with p.a. (= per annum). For example, it may be said in the contract, that rate for 3 months is 2.8% p.a. It means that interest rate for a year is 2.8% and for a three-month period, the interest is
Example 2.
Linda invested 6500€ to the account with interest rate of 3.5%. What is the annual rate?
k = 6500 €,
i = 3.5%/year = 0.035/year,
t = 1 year
Example 3.
Define the rate of a loan for Jan 20 - March 15 (not a leap-year) for each interest time, if the interest rate is 6.8% and the loan is 9800€.
We already solved the interest time for each case in Example 1.
i = 0.068 and k = 9800 euros
The best for the customer is the case 2.
| | Interest time | Rate | | |
| real/360: | 54/360 | | | |
| real/365: | 54/365 | | | |
| 30/360: | 55/360 | | | |
Example 4.
A company had to pay residual tax for 4145.60€. The due date was December 4 but it was actually paid next year in January 20. Penalty interest is 8.0% and it is calculated by 30/360.
Interest time consists of days in December (30 - 4 = 26) and in January (20) with total of 46. Thus, the penalty rate is
The total residual tax with penalty interest is
Example 5.
The reference rate (=viitekorko) for a housing loan is euribor 12 months, which happened to be 3.150%. The bank margin is 0.8%. What is the rate for the August, if the amount of loan is 107500€ at the end of July.
With euribor the interest time is calculated with real/360. There is 31 days in August, so the interest time is Interest rate is the euribor plus margin, so
Thus, the rate is
.
The calculators in Internet use, quite often, interest time 30/360. Then, the rate would be
.