MFTransparency Interest Rate Formulas
Both the Annual Percentage Rate (APR) and the Effective Interest Rate (EIR) are defined as the interest rate that would make the present value of the loan received by the client (“A”) equal to the present value of the installments paid by the client (“P”).
Outlining the metrics used to calculate pricing, this brief presents MFTransparency’s interest rate formulas.
- Calculating one period interest rate
- Calculating APR
- Calculating EIR
- XIRR Calculation, which allows for periods of different lengths