|Re: Canadian Mortgages on 12C|
Message #4 Posted by Thibaut.be on 28 May 2002, 3:07 a.m.,
in response to message #1 by Nawus
I've just calculated for you the formula.
The Canadian mortgages are actualized on a semi-annual basis on the "yield" rate given, while the American mortgages are calculated on a monthly basis on the given "yield".
Just note that, as demonstrated, the American financial institutions are the most greedy, the Canadian far less. The law in France and Belgium oblige the banks and other lenders to show the APR, which makes all offers more comparable.
So what you actually need is to convert
a) the canadian yield into APR
b) this APR into the american yield
to use correctly your 12C with Canadian mortgages.
There are several way of doing this, including the financial solver of the 12C, what I don't recommend because you may by mistake forget one value of this conversion in the financial registers and use it your final calculation. One really has to be very careful with financial calculations. It's amazing to see how simple maths (+,-,*,/ and ^) can become so complicated.
So, let's calculate the APR (i'll call it 'i') for the canadin mortgage.
i = APR
ic= showed annual percentage of the canadian mortgage
Since it's capitalized twice in the year,
i = (1+ic/2)^2-1
and the reverse is
ic = 2((1+i)^2-1)
So, if the showed rate is 12%, the APR is 12.36%
Now we've got this, we need to convert the APR into a monthly capitalized rate, to get the value to be inputed into the i variable of your 12C, as it uses the american annuity formula.
im = showed percentage of american mortgages
i = PAR
i = (1+im/12)^12-1
and the reverse is
im = 12((1+i)^(1/12)-1)
So the 'only' thing we have to do is to replace in the last statement i with the calculated value of ic, so
im = 12((1+ic/2)^(1/6)-1)
If you take the former example :
if ic = 12%
i = 12.36%
im = 11.71%, which is the value you have to key in i (in%!)
Don't forget in these formulas to key in percentages in real values, ie 12% = .12, or it won't work !