United Kingdom Calculations
The calculations for most financial problems in the United Kingdom are identical to
the calculations for those problems in the United States — which are described
earlier in this handbook. Certain problems, however, require different calculation
methods in the United Kingdom than in the United States, even though the
terminology describing the problems may be similar. Therefore, it is recommended
that you ascertain the usual practice in the United Kingdom for the financial
problem you are solving.
The remainder of this appendix describes three types of financial calculations for
which the conventional practice differs significantly between the United Kingdom
and the United States.
The amount of the repayments on home loans and mortgages offered by banks in
the United Kingdom can usually be calculated as described under Calculating the
Payment Amount, page 59. Building Societies in the United Kingdom, however,
calculate the amount of these repayments differently. In general, the repayment
amount of a Building Society mortgage is calculated as follows: first, the annual
repayment amount is calculated using the annual interest rate; second, the periodic
repayment amount is calculated by dividing the annual repayment amount by the
number of repayment periods in one year.
Furthermore, the calculations used by Building Societies are rounded; therefore, to
match their scale repayment figures you would have to round your calculations