What Is an Assumed Interest Rate?

The monthly interest rate refers to the interest calculated on a monthly basis. The monthly interest rate is expressed as a few thousandths of the principal.

Monthly interest rate

The monthly interest rates announced by banks are basically expressed after one year. For example, the annualized deposit interest rate for three months is 2.6% (bank listed). In fact, it actually counts to the current period of three months.

Suppose you have a loan of 1 million yuan, a term of 30 years, an annual interest rate of 7.05%, and repayment using the equal principal and interest method. After calculation, the monthly repayment amount is 6866.64 yuan per month. Calculated as follows:
Monthly repayment amount = principal * monthly interest rate * (1 + month interest rate) ^ n / [(1 + month interest rate) ^ n-1]
In the formula: monthly interest rate = annual interest rate / 12, n represents the number of months of the loan, ^ n represents the nth power, such as ^ 360, which represents the 360th power (loans for 30 years, 360 months). Note: When calculating (1 + month interest rate) ^ n-1, the calculation in the parentheses must be calculated first, and then reduced by 1.
Put the data just into the formula:
Monthly repayment amount = 1000000 * (7.05% / 12) * (1 + 7.05% / 12) ^ 360 / [(1 + 7.05% / 12) ^ 360-1]
= 6686.638594
= 6686.64 yuan.