Cost of Funds Calculator

Formula

The formula to calculate the Cost of Funds (COF) is:

\[ COF = B \times \left( \frac{IR}{100} \right) \times T \]

Where:

$ COF $ is the cost of funds ($)
$ B $ is the borrowed amount of funds ($)
$ IR $ is the interest rate of the borrowed funds (%)
$ T $ is the total amount of time the funds are borrowed

What is Cost of Funds?

Cost of funds describes the total interest expense paid by a company that borrows money in order to fund projects or other aspects of the business. The costs of funds are dependent on the borrowed amount, interest rate, and term of the borrowed funds.

Example

Let's say the borrowed amount (B) is $10,000, the interest rate (IR) is 5%, and the time period (T) is 1 year. Using the formula:

\[ COF = 10000 \times \left( \frac{5}{100} \right) \times 1 = 500 \, \text{dollars} \]

So, the cost of funds (COF) is $500.