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March 29th, 2014, 12:47 AM   #1
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Finance formula

Hello, guys!

I am struggling with some math formulas for a Visual FoxPro program i want to build. This is about a housing contract, made between the city hall local council and an individual.
What i want to do is calculate the credit interest rate, having a determined period of time (say 10-20 years).
Here's the formula i was thinking of, but it doesn't calculate correctly:

(c*d)/((p*(1-(1+d/p))))^(-n*p)

c=credit
d=interest rate
n=number of years
p=period(12 months)

Can you help me, please? Has anyone had a similar problem?

Thanks in advance!
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March 30th, 2014, 11:34 AM   #2
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Quote:
Originally Posted by JohnDoe2 View Post
(c*d)/((p*(1-(1+d/p))))^(-n*p)

c=credit
d=interest rate
n=number of years
p=period(12 months)
Your formula calculates the monthly payment; let m = monthly payment:
m = (c*d)/((p*(1-(1+d/p))))^(-n*p)

c = credit is ambiguous: should be c = amount borrowed

However, what you show is wrong; where did you get that?

Should be:
m = [c * d/p] / [1 - (1 + d/p)^(-n*p)]

As example: c=1000, d=.12, p=12, n=3 ; then:
m = [1000 * .12/12] / [1 - (1 + .12/12)^(-3*12)
m = 33.21 (rounded)
So borrowing \$1000 over 36 months at annual rate of 12%
compounded monthly requires monthly payment of $33.21

BUT:
if m, c, n and p are the givens, and you want to calculate
the interest rate d, then it CANNOT be done directly;
numeric methods are required.

Here you go; go find out:
numerical methods - Google Search

Last edited by MarkFL; March 31st, 2014 at 08:48 AM. Reason: Precede dollar sign with backslash
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March 31st, 2014, 04:10 AM   #3
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Hmmmm.....

Hmmm....that funny looking line (how did that happen?!)
in my post above is:
"So borrowing $1000 over 36 months at annual rate of 12 percent
compounded monthly requires monthly payment of $33.21"

NOTE to Duc: has to change "%" to "percent" to print properly....

Last edited by Denis; March 31st, 2014 at 04:13 AM.
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March 31st, 2014, 05:37 AM   #4
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Quote:
Originally Posted by Denis View Post
Hmmm....that funny looking line (how did that happen?!)
in my post above is:
"So borrowing $1000 over 36 months at annual rate of 12 percent
compounded monthly requires monthly payment of $33.21"

NOTE to Duc: has to change "%" to "percent" to print properly....
The dollar signs are converting the content between them into TeX. As a quick workaround replace a single dollar sign with $\$\backslash\$\$$.
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March 31st, 2014, 08:49 AM   #5
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Quote:
Originally Posted by Denis View Post
Hmmm....that funny looking line (how did that happen?!)
in my post above is:
"So borrowing $1000 over 36 months at annual rate of 12 percent
compounded monthly requires monthly payment of $33.21"

NOTE to Duc: has to change "%" to "percent" to print properly....
I edited your post to precede the dollar sign with a backslash which also works.
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