Doesnt Bray have similar debts?
Irish Times article says senior squad still owed €900k.
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Doesnt Bray have similar debts?
Irish Times article says senior squad still owed €900k.
I'm sure this will all be cleared up to everybody's satisfaction at the AGM, as it is every year.
The senior squad bonuses was covered a few weeks ago by the Sunday Times. Apparently the players aren't pushing it.Quote:
Originally Posted by Stuttgart88
And why the obsession with supposedly paying off the debt by 2020?Quote:
Originally Posted by osarusan
This oft quoted €5m "spent on interest and other service charges on that debt"; I that assume includes principal? Otherwise that's loan-shark territory.
50m loan at 10% per annum would give the 5 million figure. Private equity firms often charge rates and fees of around 10%. The "debt free by 2020" is the target set by the FAI themselves, so that after that date Lansdowne Road would be a major source of revenue for Irish soccer.
That's not quite right, its compound interest, you are missing a few sums there. Its not an interest free loan set at 50mil.
True, but I seriously doubt that in this instance the rate is 10%. That'd be seriously distressed territory. There's physical collateral providing security although a share in the Aviva would have a very limited range of potential buyers! The likely stream of revenue from UEFA would make a loan to FAI a reasonably respectable creditor. My guess is the effective rate is closer to 5-6% and the UEFA payments are part of the security package.
I know Desmond is no mug and I doubt there's any philanthropic element to his participation on the FAI loan but I'd love to see so e kind of gesture like him buying out the FAI and then leasing the stadium back. Net net maybe the refinancing he arranged has had a similar impact on the FAI.
Really? 50mm at 5% pa = 5mm!Quote:
Originally Posted by paul_oshea
It'd be highly unlikely such a loan would be what they call "interest only" though. I suspect that's what you were trying to say.!
More realistically there's a repayment schedule just like a regular mortgage loan where the regular instalments include an element of both interest and principal. In the early years of a fixed rate amortising loan the bulk of the payments are interest rather than principal, so realistically the FAI has made little enough headway into paying down the loan, other than what was written off in the refinancing of the Danske loan.
The key is whether the loan amortises to zero, I.e., all the principal is repaid by the end of its term or whether it's repaid to something like 30-40pc of its original value, with a view to a new loan being taken out at maturity to refinance the outstanding amount of the old loan.
There is only ever compound interest in a loan if the borrower misses out on his repayments.
Huh? Compound interest is standard in almost every loan.Quote:
Originally Posted by Stuttgart88
Compound Interest by definition is interest on interest, no?
In interest only loans the interest payment is calculated flat. In an amortising loan the way the interest and principal schedules are determined is somewhat complicated, although easy enough to do on Excel. So, in a fixed rate mortgage loan you would typically have a fixed periodic payment. In the early years this is mainly interest with a bit of principal, but in the later years it's the other way around.
But I don't think this is the same as compounding interest though, or is it? The interest is still calculated on a simple basis not a compound basis.
Check this out
http://www.amortization.com/understanding.htm
And then, more tellingly, this, which is part of the same article
http://www.amortization.com/monthly_compounding.htm
Anyway, Paul's point (I'd say) is that it's unlikely the loan is a simple non-amortising loan, what's known as a bullet loan
http://en.m.wikipedia.org/wiki/Bullet_loan
If that was his point, I'd agree!
No, compound interest is interest on the principal.
I get a loan of €1000 at 10% interest.
After one year, the principal is €1100. I pay off my agreed interest payment of €200, so the principal is now €900.
After two years, the principal at 10% interest is now €990. I haven't missed a payment but I am paying compound interest of 10% every year.
edit: I'm not using the word principal strictly correctly there but you get the point.
Yes, I get the point but the rub is exactly what you said, you're not strictly speaking using the term principal correctly. In your example you are simultaneously capitalising interest and paying the interest off. So you're compounding the interest but for zero days! The actual interest you're paying is still effectively calculated on a simple basis.
You say above you agree to pay interest of 200 after year one. But that would imply interest of 20%! What you're saying is that you agree a repayment of 200, made up of interest of 100 and principal of 100. The effect is that over time you probably pay as much in interest as you do in actual principal (which is where it feels like there's a compounding going on) but the way I conceptualise it is still in terms of simple interest. You would only ever pay compound interest if at some point your repayment is less than the rate of interest accrued over that period. Or put another way, in working out a annuity payment at all times the interest component is still a simple rate of interest applied to the principal outstanding in the previous period.
By definition, compound interest is interest on interest! I can see no other way of describing it.
http://www.investopedia.com/terms/c/...ndinterest.asp
You have it completely arseways. You're confusing interest with the repayment - if all you do is repay the interest you'll never close the loan book. The first line of the link you posted states it clearly: compound interest is interest on the principal plus the accrued interest.
What you've basically done is take compound interest and renamed it "simple interest" for no apparent reason.
No, I haven't got it arseways and I am not confusing interest with the repayment!
I explained how a fixed repayment amount includes both principal and interest and how the early years is mainly interest and the later years is mainly principal. Look up any definition anywhere of compound interest and you'll find it is "interest on interest"! Accrued interest is simple interest unless you fail to pay some interest. If interest is unpaid, you pay interest on the unpaid interest I.e., it compounds but by accruing additional interest to the original interest. Another way of saying this is that the interest is capitalised, ie., it is added to the principal so the unpaid interest also starts accruing interest.
In your example above you borrow 1000 at 10pc p.a. At the end of year 1 your interest bill is 100. You pay this off plus whatever principal you have agreed to repay. In your example you have agreed to pay 200 annually. So you pay 200 in total, which is 100 of interest and 100 of principal.
At the start of year two you have an outstanding principal of 900 and at the end of year two the interest that has accrued is 90. But you have agreed to repay 200 per year, so at the end of year 2 you repay 90 in interest and 110 in principal.
At the start of year 3 you have an outstanding loan of 790. By the end of year 3 you have clocked up interest of 79. You have agreed an annual instalment of 200 so you pay this 79 plus 121 of principal.
At the start of year 4 you now have principal of 669. And so on! I don't have a calculator but using pen and paper it looks to me like you would have repaid your loan in full in 7 and a bit years.
Over this time you will have paid 457 in interest.
The average life of the loan is 4.57 years (sum of the annual amounts outstanding after the annual repayment, divided by original principal) = 4.57.
By wonderful symmetry the interest paid in total is 1000 * 10% * 4.57.
So, simple interest is paid despite the loan being an amortising loan that repays principal.
Another angle: By the end of the loan period I'll have paid a shed load of interest and all my principal. The shed load of interest is only ever calculated on a simple basis though. But the fact that it's a lot of interest makes it feel as if there must be compounding. But there isn't if you strip everything down to first principles.
How do you determine what the annual total payment is, I.e., the 200 plucked from the air in our example.
I don't have excel in front of me but I think you use the PMT formula where you can input the starting amount of the loan, the life of the loan expressed in the same units as the frequency of repayments (in our example = number of years which we didn't specify! but it could be monthly or quarterly or annually), the final amount of the loan (for a mortgage this would be zero), the annual rate of interest and the frequency of payment (in our example this is annually). You solve for PMT by inputting the other factors.
The answer is determined by an underlying formula which you can find online.
See here for example
http://www.ruralfinance.org/fileadmi...rest_rates.pdf
There is an inherent compounding in arriving at the regular instalment above the line , but there is a simultaneous decompounding below the line!
In the sequential example above at no point is the interest paid less than the interest accrued, so no interest is charged on interest, so no compound interest is charged.
A mortgage loan or the type of loan the FAI has is very different to a credit card debt which will accrue interest on a compounded basis. Interest will clock up at a huge rate if you don't meet your payments.
are you referring to my post number 293? Read it again:)Quote:
Originally Posted by Charlie Darwin
I think you're confusing accruing with compounding.
If I put money, say one unit of money, on deposit at rate of interest n%, at the end of year one my money is 1+n. I have accrued n in interest. The bank credits my account with n and adds it to the 1. If I choose to leave 1+n on deposit for another year at n% I will accrue further interest and by the end of year two I will have (1+n)^2 in my account. I.e., the original n will be compounded. Regardless of whether I leave my earned interest n on deposit whatever amount I have in my account at the start of year two will continue to accrue interest at a rate of n% per annum. But it is only accurate to say I am compounding interest if I leave my n on deposit during year 2. The same works if it's a liability, not an asset.
He said his actions were "against the GAA" and not Garth Brooks. Soccer head, typical anti-GAA. All those soccer barstoolers. :D
Stutts remind me never to loan you money :P
Jeez, I have wasted an hour of my life explaining how a mortgage loan works and yet Paul thanks CD for his totally and utterly incorrect post above and neither has the decency to go uh, yeah, I think you're right.
I'm going off to start my own forum with TOWK who has been right about you lot all along.
Quote:
Originally Posted by Stuttgart88
In the 5 and a half years I've been wandering through these halls this is up there with the greatest posts of all time.
Given I know what Stutts does in real life, I would have no doubts with his "Danny-esque" response.
Otherwise he's been swiping money for nothing all this time.
http://www.quickmeme.com/img/19/19dd...e5fef5ade1.jpgQuote:
Originally Posted by Stuttgart88
He doesn't do anything like what you think he does.that's all done for him by people like me ;)
My real concern is how much CD has clocked up on credit card debts!
And Paul don't worry: I wouldn't lend you any money.
You implying those in senior roles are there for reasons other than ability?Quote:
Originally Posted by paul_oshea
Is he allowed get loans based as part of his roots in Roscommonism?Quote:
Originally Posted by Stuttgart88
ability in delegation. but in this instance it's not that.
and stutts don't steal and try and reuse my joke.
He merely delegated it's use to you.Quote:
Originally Posted by paul_oshea
You've entered into a dangerous amount of sophistry here. I can't put it more simply than this:Quote:
Originally Posted by Stuttgart88
Simple interest is interest on the principal. Compound interest is interest on the principal plus accrued interest. There is really no way to credibly deny that.
It pains me to agree with Paul O'Shea but it has to be done in this instance.
Not even a hint of sophistry. There is nothing disingenuous or will fully deceitful here. I'm actually quite a bit insulted by that. I accurately and honestly presented how an amortising loan works, having been told by your good self that under my logic a loan would never get repaid, it'd only ever pay off interest. I showed exactly how a loan gets repaid without any hint of compound interest.
You say compound interest is interest on the principal plus accrued interest. I presume you mean interest on (principal plus accrued interest). Interest always accrues on principal, that's a given. We both agree that.
But how does interest accrue on already accrued interest? Only if you have not paid the interest. I.e., you have rolled it up, or capitalised it.
If you pay your interest bill on time you do not end up paying compound interest.
Just as interest compounds on a deposit if you leave your earned - and credited - interest in your account. I.e., once your interest is paid, it becomes part of the principal amount that starts earning interest in the next period, you start earning interest on interest, so to speak, plus interest on the original principal too), if you have a loan you only start paying interest on interest owed if you don't pay your interest on time. If you miss your interest, you get charged interest on that interest. The unpaid interest is added to the principal and your total liability gets higher, which is where the notion of compounding comes into it. The more you miss paying, the faster your liability grows. It spirals, which is why the term "compounding" is apt.
Can we go back to the original root here:
It was said above that a 50mm loan with a 5mm interest bill would imply a 10pc interest rate. Rather usurous but not uncommon in private equity circles.
Paul said no that's too simplistic because all kinds of compounding etc must be taken account of too.
I said no, strictly speaking compounding isn't a factor, but debt servicing includes principal plus interest so my guess was that the 5mm includes principal repayments plus interest. I qualified what Paul was saying, and put it more accurately without disagreeing with his general point, which is that t's too simple to conclude that 10pc is the rate they are paying.
You then said almost all loans clock up interest on a compounded basis. Credit card debts do (well actually, again only if you don't pay, but credit cards usually demand monthly payment, a bank loan to a company is usually quarterly or even similar-annually; overdrafts are different) but I hope that the FAI does not use a credit card to pay for the Aviva, otherwise we're all goosed. But long term bank loans and mortgage loans don't involve compound interest. Of course there WILL be a provision in the documentation that says what happens if payments are missed.
More realistically the FAI have an agreed payment schedule with their new lenders. It could be that in the early years they pay only interest , no principal, but we don't know. I have no doubt they were compounding interest to Danske because they were clearly in arrears and Danske had to take a substantial write down. We weren't talking about that though.
So, to reiterate: if a borrower is meeting his payments on time he gets charged interest on a simple basis. If a borrower fails to meet his payment schedule, the unpaid interest gets added to the outstanding principal and gets charged interest on that too. That's when compounding comes in. It's not uncommon for this "extra" interest to get charged at a penalty rate.
I'm just trying to spell things out. It's not really that big a deal, but instead of allowing me to politely contradict Paul - always worthwhile - you've decided to jump down my throat saying I have got it arseways and I'm a sophist.
I was expecting you might even appreciate the effort I went to to show you how an amortising / mortgage loan works, how interest dominates the early payments but principal the later payments etc., but no, I was mistaken.
i'm not denying that. It'd be sophistry to suggest that I am.Quote:
Originally Posted by Charlie Darwin
I'm only saying that interest on accrued interest only gets charged if you haven't paid the interest.
Who suggested it was an interest free loan? I didn't see that hinted at anywhere above.Quote:
Originally Posted by paul_oshea
I do agree that W88 is probably missing a few sums, I.e., that the 5mm probably includes principal. I think in his hurry, Paul meant to say it's not an interest only loan. I'd have agreed, and effectively said that.
I don't agree that it's compound interest.
Sophistry is probably the wrong word but I think you're engaging in mental gymnastics to justify a pointless and unhelpful distinction you've made for reasons that aren't entirely obvious. You're correct that interest is only properly compounded when the repayment is lower than the normally-accruing interest, but that doesn't negate the fact that the compound interest is the mechanism that is being used regardless of whether you keep up with your payments or not. If you make your mortgage payments every month until it's paid off, you may have avoided having your interest compounded but it's still a compound interest loan.
You might not agree that it's compound interest but it's not your decision to make.
There's been a few wrong words CD, hasn't there?
I know where the problem lies between both of you, and it could be what stutts mentioned about autism, two parrallel lanes going along but never diverging.
I know what Stutts was trying to say but he clearly missed the original post and the 50mil. When you pay an amortizing loan off it gives you the final full sum, thats what stutts was getting mixed up on the 50 mil, and hence he has included it all in, so 10 payments at 5 mil a payment would have the whole lot paid off.
It pains me to have to see that CD has finally seen who is the superior intellect and had to agree, when it comes to sums, most fall by the way side to be fair. I'd rather he had got it wrong.
Cracking stuff lads.
Look, if the accusation is that I'm well and truly on the autistic spectrum you'll have no quarrel there. I haven't a leg to stand on based on my contributions above. :)
I stand my ground on compound interest, however. The purpose of questioning it in the first place was to politely point out that Paul was wrong in what he said, but probably right in what he meant to say.
Paul, parallel lines are lines that never converge. They always diverge. Did I miss something? :)
Nope not at all, thats exactly it running along, but never moving off course, never diverging off the same straight line - but still in parallel ; )
You can't use parallel in the explanation of parallel Paul. Tut tut.Quote:
Originally Posted by paul_oshea
Though there's an interesting science regarding parallel lines and that there is a theory that at some point they do converge.
*opens can of worms*
I'm going to draw a diagram on Monday to aid my poor explanation!!
parallel because they keep the same distance apart at all times but parallel lines can still veer at any angle and change course - but still remaining parallel. what I was trying to say was cd and stutts weren't following this pattern as they never veered off a straight line....Their argument stayed exactly the same with no change or movement away from the kernel of that argument.
cd with his poor choice of words or wrong words as he called them perhaps my illustrated effort was also not the best way of providing a metaphor.
http://s29.postimg.org/rrx87s6c3/sun.jpg
Click to expand. Sorry for the NSFW bit.
What? Why would Blatter pay up that kind of cash? What was FAI complaining about that incident achieving, tangibley? Sounds a bit out there.
Good golly, what a story.
Link to the story online here, although it's blocked to non-subscribers: http://www.thesun.ie/irishsol/homepa...r-Blatter.htmlQuote:
Originally Posted by Charlie Darwin
Don't suppose anyone has a subscription?
This article quotes what I imagine are the most important bits: https://uk.eurosport.yahoo.com/news/...2869--sow.html
The whole episode is a strange one alright, but haven't we come to expect this sort of carry-on from FIFA? And could you imagine the FAI turning down a gift of €5million, corrupt or not? I'm also embarrassed that that completely xenophobic "hand of frog" headline will be quoted globally, as if that's how Irish people commonly refer to the incident.Quote:
Originally Posted by Eurosport