Hassle-free Cashflow Minute Lesson 6: Math Behind Interest Rate

Hassle-free Cashflow Minute

Investor Educational Series by Professional Investor / Developer

David Campbell

Lesson 6: Math Behind Interest Rate

www.HassleFreeCashFlowInvesting.com

Interest = rate x capitalRate = interest / capitalCapital = interest / rate

Case Study: Interest = rate x capital

$100 = 10% x $1,000

Case Study: Rate = interest / capital

10% = $100 / $1,000

Case Study: Capital = interest / rate

$1,000 = $100 / 10%

CALCULATING PRORATED INTEREST

daily interest rate = annual rate / # of days per year

borrowers like to prorate using 365 days 10% annual interest /365 days = 0.0274% per day

lenders like to prorate using 360 days10% annual interest /365 days = 0.0278% per day

CALCULATING PRORATED INTEREST

daily interest rate x number of days

x principal prorated interest

0.0277% per dayx 108 daysx $100,000

$2,991.60 prorated interest

david@HassleFreeCashFlowInvesting.com

David Campbellover $800 million of real estate

transaction / advisory experience

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