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 Edit Simple Interest

Use

The section Procedure describes how you define a simple interest rate.

Prerequisites

The fields with which you create a simple interest rate are available when if make certain settings in the following fields.

  • Condition Determination in Customizing for condition types in your application

  • Period of Use and Determination Period on the Condition Determination tab page

  • Tiered or Interval Calculation on the Calculation tab page

  • Tiers for Condition Determination on the Calculation tab page

For more information about specific settings in the fields, see Decision Table for Specifying the Interest Rate in the documentation about each amount categories that relates to the interest rate.

Procedure

Basic Data About Interest Calculation

Here you edit the fields that pertain to the basic settings for interest calculation and which are available for each interest rate.

You can make the following settings:

  • Choose the purpose for which the condition is to be used in the Condition Form field.

  • Choose an Interest Calculation Method.

  • You use the Rounding Category and the Rounding Unit to define how you want to round the results.

  • You can enter a payment currency that differs from the condition currency, which is then valid for all amount fields of the condition if no condition currency exists. If both currencies exist, then the condition currency is valid.

  • If you choose Exponential in the Interest Calculation field, you can make entries in the Interest Settlement Frequency field.

Set the checkboxes Percentage-Based Reduction and Amount-Based Reduction in the dialog structure Amount Category in Customizing for condition types of your application. You can enter an amount or a percentage rate by which you want to decrease the calculation basis when determining an interest amount while you edit an interest condition.

  • Enter a percentage rate reduction and/or an amount reduction.

    If you use both methods of reduction, the system first uses the percentage-based reduction and then the amount-based reduction.

    Example Example

    The calculation base is EUR 500,000. You enter 10% for the percentage-based reduction and EUR 10,000 for the amount-based reduction.

    The system reduces the calculation base by 10%. As a result, the calculation base is now EUR 450,000. EUR 10,000 is then deducted from this amount.

    The reduced calculation base is EUR 440,000.

    End of the example.

  • If you want to use the percentage-based reduction for a reference interest rate, use the input help to choose a reference interest rate in the Reference Interest Rate Reduction field.

    • You can define a percentage for minimum and/or maximum interest reduction. The system uses this interest rate as the percentage reduction if the reference interest rate reduction is greater than or lesser than the interest rate that is defined here.

Specification of a Simplified Interest Rate

Here you edit the fields that characterize a simple interest rate. A simple interest rate is made up of only one condition item and does not have tiers or intervals.

  • Choose the value 0 - No Tiered or Interval Calculation in the Tier/Interval field.

  • If you are using condition determination, you have chosen the value 0 - No Tiers for Condition Determination in the Tiers for Condition Determination field.

  • Enter a percentage rate or a reference interest rate.

  • Alternatively, you can define relative or absolute markups for the reference interest rate. If you want to define a markup up or a markdown for a reference interest rate, you must decide whether it is added or subtracted as a fixed value or whether it is a percentage rate that is multiplied by the value of the reference interest rate.

    Example Example

    The reference interest rate is 2.5%.

    • Absolute markup 2.0%: 2.5 + 2.0 = 4.5%

    • Absolute markdown -2.0%: 2.5 - 2.0 = 0.5%

    • Relative value 90% of reference interest rate: 2.5 x 0.9 = 2.25%

    • Relative value 110% of reference interest rate: 2.5 x 1.10 = 2.75%

    End of the example.

  • You can define a minimum and a maximum interest that the system uses if the reference interest rate is greater than or lesser than the minimum or maximum interest rate.

  • You can use a formula to calculate the percentage.

Result

You have defined a simple interest rate.