Interest Formulas

17
Let

i =
interest rate per period
n =
number of interest (payment) periods
P =
present sum of money (present worth)
F =
sum of money at the end of n periods from the present date that is
equivalent to P at interest rate i (future worth)
A = uniform end-of-period payment continuing for n periods that, in total,
is equivalent to P at interest rate i (annuity)

then

F = P(1 + i)n (17.1)

 i(1 + i) n 
A = P  (17.2)
 (1 + i) − 1
n

Let

Ek = portion of A in period k paid against principal (equity payment)

Ik = portion of A in period k paid as interest (interest payment)

then

 1 
Ek = A n − k +1  (17.3)
 (1 + i) 

©2001 CRC Press LLC

  1 
I k = A1 − n − k +1  (17.4)
 (1 + i) 

(Grant, Ireson, and Leavenworth, 1982; White, Agee, and Case, 1977).

©2001 CRC Press LLC