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Procedure documentationInterest Rates for Tiered, Interval, or Mixed Tiered and Interval Calculation

 

This procedure describes how you specify interest rates for tiered, interval, or mixed tiered and interval calculation.

These tiered or interval conditions enable you to automatically adjust interest rates according to the balances of an account. You can scale interest according to the balances. The balance used as the calculation basis is defined in the condition type Customizing of your application.

You can link the tiers to amount limits, that is to upper limits (up to and including this limit) or the lower limit (from and including this limit). If the balance is under the lower limit of the first tier or over the upper limit of the last tier, then no interest rate is used.

You can use tiered or interval calculation as follows:

  • In the tiered calculation, the system uses the balance and the amount limits to calculate a percentage for each balance change. The system uses the percentage determined for the total balance.

  • In the interval calculation, the system uses the balance and the amount limits to determine a tiered condition for each balance change. The system applies the corresponding percentages to the parts of the balance defined by the amount limits. The interval calculation is executed inclusively until the determined tiered condition.

  • In the mixed tiered and interval calculation, the system uses the balance and the amount limits to determine a tiered condition for each balance change. The system applies the interval calculation to the part of the balance that contains the determined tier. The system applies the tiered calculation to the rest of the balance.

Example Example

Tier

Amount limits

Percentage rate

1

EUR 0 to EUR 100

5%

2

EUR 100 to EUR 1,000

6%

3

Over EUR 1,000

7%

The system calculates as follows if the balance is EUR 1,200.00

Tiered calculation

  1. The system determines the tier into which the balance falls.

  2. Balance x Percentage Rate Tier 3: 1,200 x 0.07 = EUR 84

Interval Calculation

  1. (Upper Limit Tier 1 - Lower Limit Tier 1) x Percentage Rate Tier 1: (100 − 0) x 0.05 = EUR 5

  2. (Upper Limit Tier 2 - Lower Limit Tier 2) x Percentage Rate Tier 2: (1,000 − 100) x 0.06 = EUR 54

  3. (Balance - Lower Limit Tier 3) x Percentage Rate Tier 3: (1,200 − 1,000) x 0.07 = EUR 14

Mixed tiered and interval calculation

  1. The system determines the tier into which the balance falls.

  2. (Balance - Lower Limit Tier 3) x Percentage Rate Tier 3: (1,200 − 1,000) x 0.07 = EUR 14

  3. Lower Limit Tier 2 x Percentage Tier 2: 1,000 x 0.06 = EUR 60

End of the example.

The following figure shows an example of the simplified use of a tiered condition as compared to an interval condition:

Prerequisites

  1. You have made all necessary settings so that the fields for creating interest rates for tiers, interval, or mixed tier/interval calculation are available.

    For more information about the required settings, see the decision table in the documentation for each amount category that is relevant for the interest rate.

  2. The system displays condition editing on the Calculation tab page.

Procedure

You can make the following settings:

  1. In the Tiers/Interval field, enter the value Tiered Calculation, Interval Calculation, or Combined.

    The system displays the Upper/Lower Limit field and the table control for tiered calculation, interval calculation, or combined tiered and interval calculation.

    • If you enter the value Upper Limit in the Upper/Lower Limit field, you can enter values as upper limits in the table control for tiered, interval, or combined tiered and interval calculation. The tier or interval is then valid up to and including this value.

    • If you enter the value Lower Limit in the Upper/Lower Limit field, you can enter values as lower limits in the table control for tiered, interval, or combined tiered and interval calculation. The tier or interval is then valid from and including this value.

  2. You can enter values in the following fields in the table control for tiered, interval, or combined tiered and interval calculation:

    • Percentage rate

    • Reference interest rate

    • Absolute or relative markup or markdown for reference interest rate

    • Markup or markdown reference interest rate

    • Minimum interest in relation to the reference interest rate

    • Maximum interest in relation to the reference interest rate

    • Formula for calculating an interest rate

    The fields for each tier or interval are the same as those used to specify a simple interest rate. For more information about the exact entries, see Editing Simple Interest Rates.

Result

You have specified interest rates for the tiered, interval, or mixed tiered and interval calculation.

More Information

Amount Category

Editing the Calculation Tab Page

Editing the Condition Determination Tab Page

Example: Interest Condition for Tiered, Interval or Mixed Tiered and Interval Calculation