A similar table below is from Hang Seng . Explain why monthly payment =$294.70 under 19.77 % rate ? How is the handling fee included in this table ? Instalment Loan Interest Rate & Monthly Repayment Table Monthly Instalment Amount (Per Loan Amount of HK$10,000) Interest Rate Loan Amount (HK$) (Annualised Percentage Rate) (per month flat) 12 months 18 months 24 months 36 months 48 months $294.70 $5,000-$14,999 $917.50 $640.10 $501.50 $363.40 0.75% (19.71%) (20.05%) (20.11%) (19.99%) (19.77%) $901.30 $623.80 $485.20 $346.90 $278.10 $15,000-$49,999 0.59% (15.75%) (16.06%) (16.15%) (16.13%) (16.01%) $897.30 $619.80 $481.10 $342.80 $273.90 $50,000-$199,999 0.55% (14.78%) (15.07%) (15.17%) (15.16%) (15.07%) $602.50 $463.80 $325.30 $256.20 $200,000-$499,999 0.38% $880.10 (10.68%) (10.92%) (11.02%) (11.07%) (11.06%) $867.00 $589.30 $450.50 $311.90 $242.70 $500,000 or above 0.25% (7.61%) (7.80%) (7.88%) (7.95%) (7.96%) The above monthly repayment amount and annualised percentage rate includes the handling fee by way of a further loan equal to 1% per annum of the loan amount. The annualised percentage rate is calculated using the Net Present Value Method in accordance with the Code of Banking Practice. Sol: For this case , the annualized percentage rate also refers to the annual effective rate , from which we can calculate the interest rate per month . For example , for the interest rate 19.77 %, the month rate is (1+ 19.77 % ) 1/12 - 1 = 1.5147 % However , we find the monthly payment is calculated directly based on PV =10000 , i.e., = PMT (1.5147 %, 48, 10000 ) = ($294.67 ) This means that the handling fee , as stated as "by the way of a further loan ", is included in the monthly payment . For comparison , if we borrow $P from Standard Chartered , we receive $(P - handling fee); if we borrow $P from Hang Seng , we receive SP. The meaning of monthly flat rate 0.75 % (for information only , not part of the course requirement [(10000 + 10000 *1% *4)* (1+0.75 % *48 ) ] / 48 = 294.67 , the stated monthly payment . Again , this equation has nothing to do with interest rates