Interest on Interest

[NomadicNature]

My apologies, My mother and I are at odds with the math involved in figuring interest on interest.

The loan is $50,000 at an interest rate of 6%. The interest of $3000 to be paid yearly, the $3000 was split by two partners, one of which has been paying the $1500, the other is having more difficulty. The contact says if the payments are late "the additional interest will be accrued daily and will be added to the payment.," The guy who owes mom money is late with a payment of $1500 by 472 days and late with an additional payment if $1500 by 107 days.

I would be delighted indeed if someone could walk me through the math need to arrive at a correct interest number to add to the $3000. If I have over stepped and used the forum in a manner which was NOT intended, my apologies.

Thank you for your time and consideration.

 

[ksdhart2]

In general, the concept of paying interest on interest is called compound interest. The typical formula used to calculate a future value is:

\(\displaystyle \displaystyle A=P\left(1+\frac{r}{n}\right)^{nt}\), where:

A = The amount owed after n years, including interest
P = The principal (how much the person borrowed)
r = The annual rate of interest
t = The number of years the money is borrowed for
n = The number of times per year the money is compounded

You have all the information necessary to determine each of these values, so it's simply a matter of "Plug 'n' Chug." Try it out and see what you get.

 

[NomadicNature]

While I can appreciate it seems simple to you, math is not one of my strengths. If you were to ask me to train you pet, I could help by math not so much.

 

[NomadicNature]

Keep it simple.

Interest for 1 day on 1500: 1500 * .06 / 365 = .24657... (that's cents!).
Charge the sob 25 cents per day

This is the math I came up with BUT then " accrued daily" was brought to light. Does this bit of simple math include accrued interest?

 

[NomadicNature]

Denis, this is the math I was working with but mom is concerned about a line in the contract wish says "if the payments are late the additional interest will be accrued daily" I am not all together sure I know what accrued means.

 

[ksdhart2]

While I can appreciate it seems simple to you, math is not one of my strengths. If you were to ask me to train you pet, I could help by math not so much.

That's certainly fair. Nobody here expects you to be a genius at math. However, we do ask that you at least show us what you've tried, even if you know it's wrong. For instance, what did you find for the various values? When you plugged said values into the formula, what did you get? We'll be more than happy to help you along, and help you learn the concepts if needed. We just need to know specifically where you're struggling.

 

[NomadicNature]

My apologies... I do not know enough math to even understand the formula you gave.

Thank you for the help you offered.