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%CO:A,74,74%%C%%H2%APR - Annual Percentage Rate of charge


%JR%APR is a yardstick for comparing one credit deal with another - the lower 
%JL%the APR the better is the deal.  It is based on %H2%all%H2% the charges a 
borrower has to pay in respect of the loan, not just the interest.

%JL%The method of calculating the APR, in some cases the only way, is the 
%JR%%H2%present value%H2% method, usually known in the business world as the DCF or 
%JL%IRR method.  The accompanying Basic program, "calc.apr", uses the 
%JR%Newton-Rapheson method of Successive Approximations to obtain a high 
%JL%degree of accuracy in only four or five attempts, very quickly dealt with 
%JR%by a computor.  In extremely rare cases the program can 'stick'.  If this 
should occur change the initial value of X in line 240 to 0.9999.

%H2%Notes%H2% - 
%JL%All inputs must be positive .  The first three inputs - No's of Advances, 
%JR%Levels and Extras must be Integers as must Level length.  Permissible 
maxima and minima of variables have been covered in the error trapping. 

%JL%Don't enter zero for No. of Levels %H2%and%H2% No. of Extras - this would result 
%JR%in no repayments being made!  If the total repayment <= total advanced 
then APR is negative or zero!  These are also guarded against.

%JL%Don't forget that you have a pop-down calculator and a calendar at your 
disposal.

%JL%The following brief examples will help you to understand the program and 
show how it can be applied to any type and complexity of credit charging.
%JR%To save space they are arranged in two columns: read down the left hand 
column first.


%JL%%H1%Example 1%H1%.    A straightforward 'equal instalment' agreement.  A loan of 
                £150 is repaid in 11 equal monthly instalments.  

    ..Advances.. ? 1               Payment  £ ? 15
    ....Levels.. ? 1        How many of these ? 11
    ....Extras.. ? 0        Periods per annum ? 12
                            
      Advance..£ ? 150      %H2%RESULT  -  APR  21.3 %PC%



%JR%%H1%Example 2%H1%.   Regular payments with varying amounts - demonstrates the use 
%JL%             of 'Levels'.  £100 loan repaid in 24 monthly instalments, the first £18 
             first 18 @ £5 and 6 more of £5.75.

    ..Advances.. ? 1         Level 2 Payment £ ? 5.75
    ....Levels.. ? 2         How many of these ? 6 
    ....Extras.. ? 0       
                             Periods per annum ? 12
      Advance..£ ? 100        

 Level 1 Payment £ ? 5
 How many of these ? 18      %H2%RESULT  -  APR  23.6 %PC%


%R%See Over for more.

%R%APR/2

%H1%Example 3%H1%.   Illustrates a typical use of levels and 'Extra' payments.  A 
%JR%             loan of £12,500 is to be repaid by 59 monthly instalments of £275.60 and 
%JR%             £275.60 and a final one of £189.60.  In addition, the 
%JR%             borrower must pay an 'admin' charge of £125 immediately.

    ..Advances.. ? 1               Extra 1 £ ? 189.60
    ....Levels.. ? 1               at time   ? 60
    ....Extras.. ? 2               Extra 2 £ ? 125
                                   at time   ? 0
      Advance..£ ? 12500           Periods per annum ? 12

         Payment £ ? 275.60      
 How many of these ? 59            %H2%RESULT  -  APR  12.5 %PC%


%JR%%H1%Example 4%H1%.   A cooker with a cash price of £375 is advertised on 24 
%JL%             months credit with "nothing to pay for 3 months" (actually 
%JR%             %H2%2%H2% instalment dates late).  Repayments are £27.50 per month.

    ..Advances.. ? 1               Level 2 Payment £ ? 27.50
    ....Levels.. ? 2               How many of these ? 22
    ....Extras.. ? 0       
                                   Periods per annum ? 12
      Advance..£ ? 375        

 Level 1 Payment £ ? 0
 How many of these ? 2             %H2%RESULT  -  APR  56.8 %PC%


%JR%%H1%Example 5%H1%.   A loan is taken out on Dec 28th 1990.  An insurance to cover 
%JL%the loan, at a cost to the borrower of £200 is to paid immediately.  The 
%JR%four instalments of £1350 are to be paid on April 1st, July 1st, and Oct 
%JL%1st in 1991 and Jan 1st 1992.  We have to work in days and, because the 
periods are not equal we treat the payments as Extras.

    ..Advances.. ? 1               Extra 3 £ ? 1350
    ....Levels.. ? 0               at time   ? 185
    ....Extras.. ? 5               Extra 4 £ ? 1350
                                   at time   ? 277
      Advance..£ ? 5000            Extra 5 £ ? 1350
                                   at time   ? 369
        Extra 1 £ ? 200
        at time   ? 0              Periods per annum ? 365
        Extra 2 £ ? 1350
        at time   ? 94            %H2% RESULT  -  APR  20.6 %PC%


   %H2%Disclaimer
%JR%The inputs and method of calculating in this program are exactly as they 
%JL%are in the recommended Basic APR program of the Office of Fair Trading. I 
%JR%have only changed the presentation, and incorporated the error trapping 
%JL%as they suggest.  This document and the program are offered to members of 
%JR%the Z88 Owners' Club for their own interest, amusement and home use.  I 
%JL%subscribe to the disclaimer of the originator of the program in the OFT 
%JR%that the results obtained cannot be guaranteed to represent a complete 
and authoritative interpretation of the law.

%R%J.E.Lawrie  15 Sycamore Grove  Southam  Leamington Spa   CV33 0EY

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