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I'm looking for a formula to discover the total principle...

<< Back to: sci.math FAQ: Formula for Compound Interest

Question by Don_q_landlord
Submitted on 4/3/2004
Related FAQ: sci.math FAQ: Formula for Compound Interest
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I'm looking for a formula to discover the total principle accumulation between n-a and n-b relating to a simple interest amortization of a home loan. n= term of the loan, a= variable of months into a loan say 12, b= second variable of months into a loan say 24.  I want to know how much principle has been paid down from month 12 to month 24 in a 30 year home mortgage.


Answer by docarrol
Submitted on 4/19/2006
Rating: Not yet rated Rate this answer: Vote
The equation for compound interest is:
  FV = P(1 + r/n)^(Y*n)
Where FV is the final value, P is the principle, r is the interest, n is the number of times per year the interest is calculated, and Y is the number of years for which the whole thing sits and accrues.

Solve for P as a function of Y, assuming r and n are constant
  P(Y) = FV/((1 + r/n)^(Y*n))

For P of (a to b) Solve for P(b) - P(a). For your example, a and b would be 1 year and 2 years, respectively. For other times, just express the number of months as decimal number of years.

 

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