on 08-23-2012 11:58 AM
Dear Experts :
In FSCM Money Markets /Loan Management /Customer Loans created facility and interest rate reinstatement and i posted Interest and Principal to Customer account.
1. IF Customer will not pay Interest before 5th of every month (principal and Interest) is subject to Interest on Interest.
2. Can any one tell me how we can calculate Interest on Interest for Due Line Items.
Regards
Sadiq
hi Experts,
Any one can update on this .............
Thank you
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Hi Sadiq
The system only calculates interest on interest (compound interest) if you capitalize the interest in the deal. Any other calculation of interest on interest is not possible.
Kind regards
Juerg Heiz
Dear Juerg,
Thank you for answer
In my case compound interest is paid on the original principal and on the accumulated past interest.
Say principal 1000
Interest will be 100 normal interest is 10%
Due on next month:
Next month interest on Interest will be calculated on 1100 say 5%
can you please provide some input how to calculate interest on interest on this above.
Thank you
sadiq
Hi Sadiq
In a normal money market deal at the end of the interest period you have the following posting if the interest is an income:
BANK to REALIZED INTEREST INCOME.
If you capitalize the interest the posting is:
ASSET ACCOUNT MONEY MARKET to REALIZED INTEREST INCOME.
In this case the interest are added to the underlying investement. e.g. if you had a start amound of currency XYZ of 1,000,000 and the interest after one month are 3,000 the new investment amount for the second month is 1,003,000. Therefore the interest are calcualated on 1,003,000 from that moment onwards. This is then the calculation of interest on interest (compound interest)
Regards
Juerg
Dear Jurg,
Installment amortization can you please tell me how is can map this in to interest rate instrument. (is there any enhancement is required please confirm)
I have to calculate Installment = Principal + Interest the base is reducing balance method and amortization method.
A = L*(R/(1-(1+R)^-P))
WHERE, |
A = INSTALLMENT AMOUNT
L = LOAN BALANCE
R = INTEREST RATE/12
P = REMAINING REPAYMENT PERIOD
Please find attachment of Detailed formula for Installment calcuation.
Regards
Sadiq
Hi again
If you enter a deal in product cat. 550 you have to enter the field repayment form and there you can enter if you have
- a final repayment
- an installment repayment
- an annuity repayment
In you case you have to enter the installment and how much the amount will be. Please check this entry as it solves your problem!
Kind regards
Juerg Heiz
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