Calculating APR
I know the implied APR of this lease is 38.5%...
The question I have is...I can finance this amount at an APR of 25% through the bank. They have a 2% fee (rolled into the amount) and it is compounded. I want to finance enough so that I have $150,000 to give to my vendor after the bank takes 2% of the financed amount).
What is the annual rate I use for this loan (they want annual payments) when comparing it to the lease?
Last edited by hman27; 03-21-2012 at 10:59 AM.
The annual rate is 18% on the amount owed assuming the bank gives you $105,000 to pay for the equipment up front; compounding rate depends on the bank's definition in the loan contract.
I'm just wondering when they give the $105,000 loan, do they compound 18% right at the start of the first year or at the end? For example, in your first period are you paying 18% compounding interest on $105,000 or 18% compounding interest on what you owe at the end of the first year?
This is the question? Have I missed something? Cheers.
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