amortization calculation

owen_xgy · February 27th, 2008, 04:36 PM

hi
i'm currently working on an amortization program. the schedule and calculation works fine for one interest rate but when i have to use different interest rates for one calculation i'm at lost as to what to do. i tried using the different rates on each value and add it together but that unsatisfactory any suggestions

Owen, Programmer

BrianWren · February 27th, 2008, 06:36 PM

Well, one suggestion is to press your shift key into service. That makes you r post a lot easier to read...

Can you explain in a little more detail what the situation is? I'm not clear on that... When you said, â[I] have to use different interest rates for one calculation,â I thought you had the interest rate built into the code, and didn't know how to make it more dynamic.

But then you said, â[I] tried using the different rates on each value...â and I become unclear. More than one rate on each value? A series of value/rate pairs?

owen_xgy · February 28th, 2008, 10:16 AM

I'm currently working on an amortization schedule program. The programme works ok when i enter the value and one interest rate. The programme is reading the rate from an ini file. The problem is when a person takes a loan that attracts different interest rates. The calculation is
1. If the person borrows $5000 then the interest rate is 5.5%
2. Less than $10000 the interest rate for the 1st 5000 is 5.5 and the remainder the rate is 6.5%
3. less than $15000 the rate for 3rd 5000 is 7.5%
4. greater than 15000 the rate is calculated as before and everything over $15000 attracts a rate of 8.5 %

If a loan attracts different interest rates i would calculate each separate and add them together but the value i'm getting isn't satisfactory any other suggestions on how to do this.
i'm using the PMT function to calculate the monthly payment.

Owen, Programmer

BrianWren · February 28th, 2008, 06:25 PM

Well, you are absolutely right that you would perform a separate calculation for each rate, and for the portion of the principal that that particular rate applies to. So if these are APRs, then you would have, for one payment toward 16,750:

Code:

Interest = (5,000 Ã (0.055 / 12))
         + (5,000 Ã (0.065 / 12))
         + (5,000 Ã (0.075 / 12))
         + (1,750 Ã (0.085 / 12))

or 93.65. If you want to calculate future payment, and so on, you might have to write a function yourself that slogs through all this. The amortization formulae are not designed for something this complex. All of them work with one principal, not a variety of them at differing departure points.