Kigenyi Wilfred created FINERACT-2062:
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Summary: Use 48 weeks in a year when interest rate is per month
Key: FINERACT-2062
URL: https://issues.apache.org/jira/browse/FINERACT-2062
Project: Apache Fineract
Issue Type: Improvement
Components: Loan
Affects Versions: 1.9.0
Reporter: Kigenyi Wilfred
Fix For: 1.10.0
Given that the interest rate period on a loan is monthly and client has chosen
to make weekly repayments, it makes more sense to assume that there are 4 weeks
in the month and 12 months in the year which comes to 48 weeks rather than
assuming the traditional 52 weeks in the year.
For example if a loan has a flat interest rate of 2% Per month and the
principal is 1000 and the repayments are weekly, weekly interest is currently
computed as follows:
interest per week = (0.02*12*1000)/52 = 4.61538
it would make more sense if interest per month is computed as follows:
interest per week = (0.02*12*1000)/48 = 5
In other words there is no need for computing weeks in a year when we are
dealing with a month. There are 4 weeks in a month and this assumption
calculates a more reasonable figure as compared to when we compute weeks in
year.
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