S.K.

PATEL INSTITUTE OF
MANAGEMENT AND COMPUTER
STUDIES

Assignment On Calculation of
EFFECTIVE INTEREST RATE

Submitted To:
Prof. Sandhya

Submitted By:
Gurjar pankaj k (34)
Modi Dhara J (59)
Kharpate Swapnil S (47)
Jadav Akshay (38)
 Date: 18-12-2008

For the purpose of knowing interest rate on a car loan we visited Maruti Suzuki’s dealer Popular
wheeler pvt.ltd. Which is situated at Narol, Ahmedabad.from there we get information about the
payment criteria for purchasing car on loan.

We have to find out the different installments for 3 years, 5 years and 7 years and the difference rate
of interest for it. When we asked about it they have give us the following details.

ICICI BANK

Loan of Rs.200000, Loan Period-3 Years, Installment-Monthly, Interest Rate-12%

  LOAN PERIOD-3  YEARS     

Beginning Monthly Principal Remaining
Year Amount Installment Interest Repayment Balance
1 200000.00 6643 2000.00 4643.00 195357.00
2 195357.00 6643 1953.57 4689.43 190667.57
3 190667.57 6643 1906.68 4736.32 185931.25
4 185931.25 6643 1859.31 4783.69 181147.56
5 181147.56 6643 1811.48 4831.52 176316.03
6 176316.03 6643 1763.16 4879.84 171436.19
7 171436.19 6643 1714.36 4928.64 166507.56
8 166507.56 6643 1665.08 4977.92 161529.63
9 161529.63 6643 1615.30 5027.70 156501.93
10 156501.93 6643 1565.02 5077.98 151423.95
11 151423.95 6643 1514.24 5128.76 146295.19
12 146295.19 6643 1462.95 5180.05 141115.14
13 141115.14 6643 1411.15 5231.85 135883.29
14 135883.29 6643 1358.83 5284.17 130599.12
15 130599.12 6643 1305.99 5337.01 125262.11
16 125262.11 6643 1252.62 5390.38 119871.74
17 119871.74 6643 1198.72 5444.28 114427.45
18 114427.45 6643 1144.27 5498.73 108928.73
19 108928.73 6643 1089.29 5553.71 103375.01
20 103375.01 6643 1033.75 5609.25 97765.76
21 97765.76 6643 977.66 5665.34 92100.42
22 92100.42 6643 921.00 5722.00 86378.43
23 86378.43 6643 863.78 5779.22 80599.21
 24 80599.21 6643 805.99 5837.01 74762.20
25 74762.20 6643 747.62 5895.38 68866.82
26 68866.82 6643 688.67 5954.33 62912.49
27 62912.49 6643 629.12 6013.88 56898.62
28 56898.62 6643 568.99 6074.01 50824.60
29 50824.60 6643 508.25 6134.75 44689.85
30 44689.85 6643 446.90 6196.10 38493.75
31 38493.75 6643 384.94 6258.06 32235.69
32 32235.69 6643 322.36 6320.64 25915.04
33 25915.04 6643 259.15 6383.85 19531.19
34 19531.19 6643 195.31 6447.69 13083.51
35 13083.51 6643 130.84 6512.16 6571.34
36 6571.34 6643 65.71 6577.29 -5.95
Total   239148 39142.05    
Actual Interest= Total Payment-Principal Amount

=239148-200000

=39148

Effective Interest Rate= {1+(Stated Annual Interest Rate/m)}^m-1

={1+(0.12/12)}^12-1

=0.1268

So, the effective rate of interest is 12.68%

ICICI BANK

1. Loan of Rs.200000, Loan Period-5 Years, Installment-Monthly, Interest Rate-12.5%

  LOAN PERIOD  5YEARS     

 Beginning Monthly Principal Remaining
Month Amount Installment Interest Repayment Balance
1 200000.00 4500 2083.33 2416.67 197583.33
2 197583.33 4500 2058.16 2441.84 195141.49
3 195141.49 4500 2032.72 2467.28 192674.22
4 192674.22 4500 2007.02 2492.98 190181.24
5 190181.24 4500 1981.05 2518.95 187662.29
6 187662.29 4500 1954.82 2545.18 185117.11
7 185117.11 4500 1928.30 2571.70 182545.41
8 182545.41 4500 1901.51 2598.49 179946.93
9 179946.93 4500 1874.45 2625.55 177321.38
10 177321.38 4500 1847.10 2652.90 174668.47
11 174668.47 4500 1819.46 2680.54 171987.94
12 171987.94 4500 1791.54 2708.46 169279.48
13 169279.48 4500 1763.33 2736.67 166542.81
14 166542.81 4500 1734.82 2765.18 163777.63
15 163777.63 4500 1706.02 2793.98 160983.64
16 160983.64 4500 1676.91 2823.09 158160.56
17 158160.56 4500 1647.51 2852.49 155308.06
18 155308.06 4500 1617.79 2882.21 152425.85
19 152425.85 4500 1587.77 2912.23 149513.62
20 149513.62 4500 1557.43 2942.57 146571.06
21 146571.06 4500 1526.78 2973.22 143597.84
22 143597.84 4500 1495.81 3004.19 140593.65
23 140593.65 4500 1464.52 3035.48 137558.17
24 137558.17 4500 1432.90 3067.10 134491.06
25 134491.06 4500 1400.95 3099.05 131392.01
26 131392.01 4500 1368.67 3131.33 128260.68
27 128260.68 4500 1336.05 3163.95 125096.73
28 125096.73 4500 1303.09 3196.91 121899.82
29 121899.82 4500 1269.79 3230.21 118669.61
30 118669.61 4500 1236.14 3263.86 115405.75
31 115405.75 4500 1202.14 3297.86 112107.89
32 112107.89 4500 1167.79 3332.21 108775.68
33 108775.68 4500 1133.08 3366.92 105408.76
34 105408.76 4500 1098.01 3401.99 102006.77
35 102006.77 4500 1062.57 3437.43 98569.34
36 98569.34 4500 1026.76 3473.24 95096.11
37 95096.11 4500 990.58 3509.42 91586.69
38 91586.69 4500 954.03 3545.97 88040.72
39 88040.72 4500 917.09 3582.91 84457.81
 40 84457.81 4500 879.77 3620.23 80837.58
41 80837.58 4500 842.06 3657.94 77179.64
42 77179.64 4500 803.95 3696.05 73483.59
43 73483.59 4500 765.45 3734.55 69749.05
44 69749.05 4500 726.55 3773.45 65975.60
45 65975.60 4500 687.25 3812.75 62162.84
46 62162.84 4500 647.53 3852.47 58310.37
47 58310.37 4500 607.40 3892.60 54417.77
48 54417.77 4500 566.85 3933.15 50484.63
49 50484.63 4500 525.88 3974.12 46510.51
50 46510.51 4500 484.48 4015.52 42494.99
51 42494.99 4500 442.66 4057.34 38437.65
52 38437.65 4500 400.39 4099.61 34338.04
53 34338.04 4500 357.69 4142.31 30195.73
54 30195.73 4500 314.54 4185.46 26010.27
55 26010.27 4500 270.94 4229.06 21781.21
56 21781.21 4500 226.89 4273.11 17508.09
57 17508.09 4500 182.38 4317.62 13190.47
58 13190.47 4500 137.40 4362.60 8827.87
59 8827.87 4500 91.96 4408.04 4419.83
60 4419.83 4500 46.04 4453.96 -34.13
Total 2700000

Actual Interest= Total Payment-Principal Amount

=270000-200000

=70000

Effective Interest Rate= {1+(Stated Annual Interest Rate/m)}^m-1

={1+(0.125/12)}^12-1

=0.13.24

So, the effective rate of interest is 13.24%

ICICI BANK
2. Loan of Rs.200000, Loan Period-7 Years, Installment-Monthly, Interest Rate-12.5%

  LOAN PERIOD 7YEARS    

Beginning Monthly Principal Remaining
Month Amount Installment Interest Repayment Balance
 1 200000.00 3584 2083.33 1500.67 198499.33
2 198499.33 3584 2067.70 1516.30 196983.03
3 196983.03 3584 2051.91 1532.09 195450.94
4 195450.94 3584 2035.95 1548.05 193902.89
5 193902.89 3584 2019.82 1564.18 192338.71
6 192338.71 3584 2003.53 1580.47 190758.24
7 190758.24 3584 1987.06 1596.94 189161.30
8 189161.30 3584 1970.43 1613.57 187547.73
9 187547.73 3584 1953.62 1630.38 185917.36
10 185917.36 3584 1936.64 1647.36 184270.00
11 184270.00 3584 1919.48 1664.52 182605.47
12 182605.47 3584 1902.14 1681.86 180923.61
13 180923.61 3584 1884.62 1699.38 179224.24
14 179224.24 3584 1866.92 1717.08 177507.15
15 177507.15 3584 1849.03 1734.97 175772.19
16 175772.19 3584 1830.96 1753.04 174019.15
17 174019.15 3584 1812.70 1771.30 172247.85
18 172247.85 3584 1794.25 1789.75 170458.10
19 170458.10 3584 1775.61 1808.39 168649.70
20 168649.70 3584 1756.77 1827.23 166822.47
21 166822.47 3584 1737.73 1846.27 164976.20
22 164976.20 3584 1718.50 1865.50 163110.70
23 163110.70 3584 1699.07 1884.93 161225.77
24 161225.77 3584 1679.44 1904.56 159321.21
25 159321.21 3584 1659.60 1924.40 157396.81
26 157396.81 3584 1639.55 1944.45 155452.36
27 155452.36 3584 1619.30 1964.70 153487.65
28 153487.65 3584 1598.83 1985.17 151502.48
29 151502.48 3584 1578.15 2005.85 149496.63
30 149496.63 3584 1557.26 2026.74 147469.89
31 147469.89 3584 1536.14 2047.86 145422.03
32 145422.03 3584 1514.81 2069.19 143352.85
33 143352.85 3584 1493.26 2090.74 141262.10
34 141262.10 3584 1471.48 2112.52 139149.58
35 139149.58 3584 1449.47 2134.53 137015.06
36 137015.06 3584 1427.24 2156.76 134858.30
37 134858.30 3584 1404.77 2179.23 132679.07
38 132679.07 3584 1382.07 2201.93 130477.15
39 130477.15 3584 1359.14 2224.86 128252.28
40 128252.28 3584 1335.96 2248.04 126004.25
41 126004.25 3584 1312.54 2271.46 123732.79
42 123732.79 3584 1288.88 2295.12 121437.67
43 121437.67 3584 1264.98 2319.02 119118.65
44 119118.65 3584 1240.82 2343.18 116775.47
45 116775.47 3584 1216.41 2367.59 114407.88
46 114407.88 3584 1191.75 2392.25 112015.63
47 112015.63 3584 1166.83 2417.17 109598.46
48 109598.46 3584 1141.65 2442.35 107156.11
49 107156.11 3584 1116.21 2467.79 104688.32
50 104688.32 3584 1090.50 2493.50 102194.82
51 102194.82 3584 1064.53 2519.47 99675.35
52 99675.35 3584 1038.28 2545.72 97129.64
53 97129.64 3584 1011.77 2572.23 94557.40
54 94557.40 3584 984.97 2599.03 91958.38
55 91958.38 3584 957.90 2626.10 89332.28
56 89332.28 3584 930.54 2653.46 86678.82
57 86678.82 3584 902.90 2681.10 83997.72
58 83997.72 3584 874.98 2709.02 81288.70
59 81288.70 3584 846.76 2737.24 78551.46
60 78551.46 3584 818.24 2765.76 75785.70
61 75785.70 3584 789.43 2794.57 72991.14
62 72991.14 3584 760.32 2823.68 70167.46
63 70167.46 3584 730.91 2853.09 67314.37
64 67314.37 3584 701.19 2882.81 64431.56
65 64431.56 3584 671.16 2912.84 61518.73
66 61518.73 3584 640.82 2943.18 58575.55
67 58575.55 3584 610.16 2973.84 55601.71
68 55601.71 3584 579.18 3004.82 52596.89
69 52596.89 3584 547.88 3036.12 49560.78
70 49560.78 3584 516.26 3067.74 46493.03
71 46493.03 3584 484.30 3099.70 43393.34
72 43393.34 3584 452.01 3131.99 40261.35
73 40261.35 3584 419.39 3164.61 37096.74
74 37096.74 3584 386.42 3197.58 33899.16
75 33899.16 3584 353.12 3230.88 30668.28
76 30668.28 3584 319.46 3264.54 27403.74
77 27403.74 3584 285.46 3298.54 24105.20
78 24105.20 3584 251.10 3332.90 20772.29
79 20772.29 3584 216.38 3367.62 17404.67
80 17404.67 3584 181.30 3402.70 14001.97
81 14001.97 3584 145.85 3438.15 10563.82
82 10563.82 3584 110.04 3473.96 7089.86
 83 7089.86 3584 73.85 3510.15 3579.72
84 3579.72 3584 37.29 3546.71 33.00
Actual Interest= Total Payment-Principal Amount

=301056-200000

=101056

Effective Interest Rate= {1+(Stated Annual Interest Rate/m)}^m-1

={1+(0.125/12)}^12-1

=0.13.24

So, the effective rate of interest is 13.24%