A Measure for the Extra-costs to Evaluate the Global Cost of Credit

Authors

  • Luisa Tibiletti Department of Management, University of Torino, Italy.
  • Mariacristina Uberti Department of Management, School of Management and Economics, University of Torino, Torino, Italy.

DOI:

https://doi.org/10.9734/bpi/ieam/v6/5362D

Keywords:

Effective Annual Interest (EAR), extra-costs, global cost of credit, Macaulay duration

Abstract

The aim of this note is to measure the impact of the extra-costs payment on the Effective Annual interest Rate (EAR) of a consumer instalment credit. We show that EAR can be approximated by augmenting the credit rate with an extra-costs rate addendum. This latter addendum is a function of the Macaulay duration of the extra-costs payments.

Published

2021-02-20

How to Cite

Luisa Tibiletti, & Mariacristina Uberti. (2021). A Measure for the Extra-costs to Evaluate the Global Cost of Credit. Insights into Economics and Management Vol. 6, 68–72. https://doi.org/10.9734/bpi/ieam/v6/5362D

Issue

Insights into Economics and Management Vol. 6

Section

Chapters