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Albert Chan · (This post was last modified: 05-16-2024 12:06 AM by Albert Chan.)

PM exchange between Gil and me, for the "real" meaning of C/yr
Comments welcome.

Gil Wrote:Let's say I%YR=5%
compounds/YR = 3
and payments/YR = 12.

When so doing, does the bank really gives a monthly interest of .414087532% for each monthly payment (for the first, 2nd and 3rd payment?) I understand the calculation, but I have my doubts about the effective bank practice. Or does the bank instead wait for the 4 payments to be on the account to then start to calculate/"offer" the interest?
In that latter case we should of course never have 12 payments in a year, but have only 3.

Albert Chan Wrote:I was also confused of how to generate a mortgage table, when (P/Yr) ≠ (C/Yr)
Do you get a saw-tooth shaped table?

From HP Prime amortization table, answer is No!

N=60, PV=30000, FV=0, I%Yr=5.00, P/Yr=12, C/Yr = 3, END=1 → PMT = -565.71

Code:

1 −441.48 −124.23 29558.52 2 −443.31 −122.40 29115.21 3 −445.15 −120.56 28670.06 ...

1st payment, rate = 124.23 / 30000 = 0.4141%
2nd payment, rate = 122.40 / 29558.52 = 0.4141%
3rd payment, rate = 120.56 / 29115.21 = 0.4141%
...

The way I see it, (C/Yr > 1) is just a fancy way to boost-up rate, without saying so.
It is a way to confuse people. Why do we care how the bank does thing internally?

Banking shopping, ask for APY!

(I%YR = 5, C/Yr = 3) --> APY = 5.0838%
(I%YR = 5, C/Yr =∞) --> APY = 5.1271%

Gil Wrote:The HP50G has the amortisation tables that once I checked to be correct from what I learnt, but it does not provide the option C/YR (the calculation for PMT is made with C/YR = P/YR).

Not sure that the bank employees know what's going on with their interest calculations.

They use programs, as the car sellers also do, that show sometimes small unexplained discrepancies with accurate, correct calculation.

Apparently, they know how to make profits in a different way.

You can publish my and your answers, Albert.

Regards