Ask Experts Questions for FREE Help !
Ask
    bensuncle's Avatar
    bensuncle Posts: 1, Reputation: 1
    New Member
     
    #1

    Aug 10, 2015, 11:02 PM
    Help Please! Calculating an AER
    Hi everyone.

    I require some help on calculating an AER. My business provides 90 day loans to borrowers. There are 2 variables that are taken into account when calculating the interest rate they are charged:

    1) An annual interest rate (5%)
    2) A one off fee per loan of 0.25% (This is an administration fee)

    I would like to be able to provide borrowers an AER. They are provided a revolving credit facility (like an overdraft) and they can 'draw down' from this facility in any denomination they wish, providing it is within the overall credit limit. The one off fee is payable per draw down, the interest rate is charged on an uncompounded daily basis (5%/365 x T) for outstanding balance.

    When calculating the AER how do I account for the one off fee? In theory, because the 0.25% is payable per loan per 90 days, they could do 4 (365/90) loans per year so should I add 1% (.25%x4) to the interest rate an provide an AER of 6%, or is it simply 5.25%? It is further complicated as they are provided a revolving credit facility, so they could do 4 draw downs a year (each of £100k and paying back on day 90), or they could do 10 transactions per 90 days each of £10k (and they would pay 0.25% per transaction. Would I then have to add 10% (0.25% x 10 x 4times a yr) to the interest rate of 5%?

    Any help greatly appreciated and if I have omitted any information please let me know.

    Thank you .

Check out some similar questions!

Calculating revenue [ 1 Answers ]

How would I find what the revenue is if only given Dividends,Expenses,Stockholders equity during the year?

Calculating, is this correct [ 1 Answers ]

$7,000 in 5 years at a quarterly discount rate of 6%= $7000 x 0.7471 = $5229.70

Calculating Mean [ 3 Answers ]

Hi there, I am trying to find out the mean height in this case but there are no displayed data from the sample here. It simplies says: The same mean height for a class of 30 students was 170 cm. The 20 male students in the class have a mean height of 180 cm. What is the mean height of female...

Calculating the pH [ 1 Answers ]

A solution is made by dissolving 0.80 grams of calcium hydroxide in water to make 100 mL final solution. Calculate the pH of the solution at SATP. Any help is appreciated thanks

Calculating pH [ 1 Answers ]

Calculate the pH of the solution when 25 mL of 0.10 M HCl is added to 25 mL of 0.050 M NaOH.


View more questions Search
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.