The Basic Equation Expressing the Equivalence of Loans on the one Hand and Repayments and Charges on the Other
Meaning of letters and symbols:
K is the number of a loan
K’ is the number of a repayment or a payment of charges
Ak is the amount of loan number K
A’k’ is the amount of repayment number K’
∑ represents a sum
m is the number of the last loan
m’ is the number of the last repayment or payment of charges
tk is the interval, expressed in years and fractions of a year, between the date of loan No. 1 and those of subsequent loans Nos 2 to m
tk’ is the interval, expressed in years and fractions of a year, between the date of loan No. 1 and those of repayments or payments of charges Nos 1 to m’
i is the percentage rate that can be calculated (either by algegra, by successive approximations, or by a computer programme) where the other terms in the equation are known from the contract or otherwise.
Remarks:
(a) The amounts paid by both parties at different
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