The object of this note is to quantify the impact of an extra-costs payment on a consumer instalment credit’s Effective Annual Interest Rate (EAR). We demonstrate the EAR can be approximated by adding an extra-costs rate addendum to the credit rate. The Macaulay length of the extra-costs payments decides the above addendum.
Author (s) Details
Department of Management, University of Torino, Italy.
Department of Management, School of Management and Economics, University of Torino, Torino, Italy.
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