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Homework Help: Weekly Annuity Calculation Method

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  1. Sep 17, 2010 #1
    1. The problem statement, all variables and given/known data
    Consider a new Loan as below:
    InterestRate = 56.558% annual in arrear
    Amount = 1.000.000
    Principal Payment Period = weekly (7 Days)
    Term = 25 weeks

    2. Relevant equations
    How to calculate the weekly installment amount?
    How's this "weekly principal payment" term has affect to the Interest rate compound period per year?


    3. The attempt at a solution
    two approach that I know of: (using excel)
    1. compound periods per year using daily, so 1 week means 7 Days
    - formula: PMT(InterestRate * 7 / 360 ,Term,-Amount,0,0)

    2. compound periods per year using weekly, which is 50 week a year (I was told we only use 50 and not use 52 weeks a year, the same goes with using 360 days a year instead of 365 a year)
    - formula: PMT(InterestRate / 50,Term,-Amount,0,0)

    So any help? Which of the two is valid? or perhaps any other more valid approach beside those two?
     
  2. jcsd
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