Function InvestmentConstantInterestPayment(PresentValue, FutureValue, NumberPeriods, Period, InterestRate, Type)

InvestmentConstantInterestPayment

The function InvestmentConstantInterestPayment returns the interest payment of the specified period for an investment based on periodic, constant payments and a constant interest rate. Every periodic payment can be divided in two parts: an interest payment and a principal repayment.

InvestmentConstantInterestPayment(
    PresentValue,            ! (input) numerical expression
    FutureValue,             ! (input) numerical expression
    NumberPeriods,           ! (input) numerical expression
    Period                   ! (input) numerical expression
    InterestRate,            ! (input) numerical expression
    Type                     ! (input) numerical expression
    )

Arguments

PresentValue

The total amount that a series of future payments is worth at this moment. PresentValue must be a real number.

FutureValue

The cash balance you want to attain after the last payment is made. FutureValue must be a real number.

NumberPeriods

The total number of payment periods for the investment. NumberPeriods must be a positive integer.

Period

The period for which you want to compute the interest payment. Period must be an integer in the range \(\{1, NumberPeriods + Type \}\). When \(Type = 1\), the extra period is to account the interest over the former period.

InterestRate

The interest rate per period for the investment. InterestRate must be a numerical expression in the range \((-1, 1)\).

Type

Indicates when payments are due. \(Type = 0\): Payments are due at the end of each period. \(Type = 1\): Payments are due at the beginning of each period.

Return Value

The function InvestmentConstantInterestPayment returns the interest payment for the specified period.

Equation

The interest payment \(i_i\) in period \(i\) is computed through the equation

\[i_i = -v_pr(1+r)^{i-1-T} - p\left(\left((1+r)^{i-1-T}-1\right)(1+r)^T+rT\right)\]

Note

• This function can be used in an objective function or constraint and the input parameters PresentValue, FutureValue and InterestRate can be used as a variable.

• The function InvestmentConstantInterestPayment is similar to the Excel function IPMT.

Example

How much interest is paid for a loan of ten years and an interest of 4% in each period:

_p_life := 10 ;
_bp_type := 1;
_s_periods := ElementRange(1, _p_life + _bp_type);
_p_InterestPayment(_i_per) :=
    InvestmentConstantInterestPayment(
        PresentValue  :  100,
        FutureValue   :  0,
        NumberPeriods :  10,
        Period        :  _i_per,
        InterestRate  :  0.04,
        type          :  _bp_type);
block where single_column_display := 1, listing_number_precision := 6 ;
    display _p_InterestPayment;
endblock ;

The following table shows that the interest portion of each anuity becomes less:

_p_InterestPayment := data
{  2 : -3.525804e+00,
   3 : -3.192640e+00,
   4 : -2.846150e+00,
   5 : -2.485800e+00,
   6 : -2.111036e+00,
   7 : -1.721282e+00,
   8 : -1.315937e+00,
   9 : -8.943784e-01,
  10 : -4.559576e-01,
  11 :  4.440892e-15 } ;

References

• General equations for investments with constant, periodic payments.