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Comment by kgwgk

2 years ago

> (beware though, Wikipedia is bound to lead to errors by defining the monthly rate as yearly rate / 12)

Lead to errors relative to what? The mathematical idealisation or the actual practice?

Are you referring to this page?

https://en.wikipedia.org/wiki/Mortgage_calculator

"Since the quoted yearly percentage rate is not a compounded rate, the monthly percentage rate is simply the yearly percentage rate divided by 12."

Do you think that the explanation above is wrong?

In practice interest payments are calculated in many "wrong" ways, but that's what it is:

https://en.wikipedia.org/wiki/Day_count_convention

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kgwgk

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contravariant  2 years ago

I was looking at: https://en.wikipedia.org/wiki/Mortgage#Principal_and_interes...

It's not necessarily wrong, but it's missing any disclaimer about which interest rates they're talking about so if you don't know what you're doing it will lead to mistakes.

  • kgwgk  2 years ago

    Ok, so defining the monthly rate as yearly rate / 12 will lead to mistakes if the yearly rate is not twelve times the monthly rate.

    (Of course any other definition of monthly rate will also lead to mistakes when it's inconsistent with the definition of yearly rate.)