S
Scott Johnson
I have a general question that I am hoping some financial wizard out
there might be able to help me with. Currently we are required to pay
3% interest on refunds that we are making, going back to the time of
payment. So if someone paid too much on 12/10/2002 and we are issuing
a refund we would need to pay interest back to that date as of the
date the refund is processed. Currently we are taking 3% and dividing
it by 365 to calculate a daily rate to pay on the refunds. So
(.03/365)*(8/6/03-12/10/02). I am thinking that a more proper way to
do this would be to use an interest factor that would be compounded
daily since we are calculating the interest by day. So I used the
RATE Function,RATE(365,,-100,103,,) to determine the daily rate to
use. Any thoughts on this as to its correctness or flaws? By doing
this we would then be paying out an actual rate of 2.956% instead of
the 3% but the 2.956%, when compounded daily, is 3% per year. It
seems like a minimal amount but if you carry it through to higher
interest rates and multi-million dollars of refunds a year, it adds up
to quite a chunck of change. Thanks in advance for any thoughts or
help that you can give.
there might be able to help me with. Currently we are required to pay
3% interest on refunds that we are making, going back to the time of
payment. So if someone paid too much on 12/10/2002 and we are issuing
a refund we would need to pay interest back to that date as of the
date the refund is processed. Currently we are taking 3% and dividing
it by 365 to calculate a daily rate to pay on the refunds. So
(.03/365)*(8/6/03-12/10/02). I am thinking that a more proper way to
do this would be to use an interest factor that would be compounded
daily since we are calculating the interest by day. So I used the
RATE Function,RATE(365,,-100,103,,) to determine the daily rate to
use. Any thoughts on this as to its correctness or flaws? By doing
this we would then be paying out an actual rate of 2.956% instead of
the 3% but the 2.956%, when compounded daily, is 3% per year. It
seems like a minimal amount but if you carry it through to higher
interest rates and multi-million dollars of refunds a year, it adds up
to quite a chunck of change. Thanks in advance for any thoughts or
help that you can give.