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Thread: Harmoney

  1. #2491
    yeah, nah
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    Quote Originally Posted by IntheRearWithTheGear View Post
    Remind me never to borrow money from you myles - as one of us is going to be disappointed at the end of 5 years.
    I see you've added highlighting, but you are still wrong - read the last line of my previous reply. I'll do the calculation for you later...

  2. #2492
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    Hay, i have to suck eggs everybody.

    I made a mistake with the previous example. I didnt use the xirr function correctly over the payments as they coming in.

    The answer maybe closer to 6% over the period. Ie i did it at the end instead as they actually happened which is wrong.

    Oh well live and learn - i will go back to my cave now. I may still be wrong but maybe more closer.


    SS.zip

  3. #2493
    yeah, nah
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    Quote Originally Posted by IntheRearWithTheGear View Post
    Hay, i have to suck eggs everybody.SS.zip
    Nah, what you originally showed is what a few here have shown they think is the way to calculate returns. The key is that when that principal starts coming back it's no longer part of the investment. You don't need XIRR to calculate this example - percentages do subtract in this case. Full set of numbers in the image below, which might help clarify it for others - bold column shows how much of the original $10,000 is still invested over the course of the loan:

    ActualReturn.jpg

  4. #2494
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    In your example what does period rate mean ?

    ie which columns give you that number ?


    And what is the return over the 5 years ? on that single loan - no reinvestments.



    Do you agree with this statement - if we lend somebody 10k at 6.99 for 5 years on one loan - we get back 10k (capital) plus $1596.22 (interest once harmony had their slice) ?


    I do understand that the interest 1596.22 is over the lifespan of the loan ie divided by the time slices of the loan.

    Cheers and Thanks

    (texting from the cave)
    Last edited by IntheRearWithTheGear; Today at 01:23 PM.

  5. #2495
    yeah, nah
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    Quote Originally Posted by IntheRearWithTheGear View Post
    In your example what does period rate mean ?
    The interest rate returned for the period (1 month) as an annual rate (so it can be compared to other annual rates).

    Quote Originally Posted by IntheRearWithTheGear View Post
    ie which columns give you that number ?
    Calculated as follows:

    Interest less Fee Returned / Invested * 12

    e.g For the 1st period: 49.51 / 10000 * 12 (multiplying by 12 as the period is only for one month, this makes it an annual rate so comparable to the 6.99% pa)


    Quote Originally Posted by IntheRearWithTheGear View Post
    And what is the return over the 5 years ? on that single loan - no reinvestments.
    The rate of return is 5.94% pa on the amount invested across the loan period (this is not $10,000 for the whole loan - it is reducing as shown in previous attachment).

    Quote Originally Posted by IntheRearWithTheGear View Post
    Do you agree with this statement - if we lend somebody 10k at 6.99 for 5 years on one loan - we get back 10k (capital) plus $1596.22 (interest once harmony had their slice) ?
    Yes and no. Yes in that we get those amounts back spread across the loan period as per my previous attachment. No in that we lend them $10,000 at the start, but at year 1 we are only lending them $8,268.65 as they have repaid us $1,731.35 (plus interest) - so we are not lending them $10,000 for 5 years.

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