User Guide: Appendix > Equations and Procedures
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Equations and Procedures

The equation for determining an amortized payment is:

Where:

P = Periodic Payment
Pr = Principal
n = Number of Payments
i = Periodic Interest (Interest rate / number of payments per year)

Example:

$10,000 amortized over one year at 12% with monthly payments.

Pr = 10,000
n = 12
i = .01

The summation sign tells us to take the sum of the following 12 quotients:

1 divided by 1.01 raised to the power of 1
1 divided by 1.01 raised to the power of 2
1 divided by 1.01 raised to the power of 3
1 divided by 1.01 raised to the power of 4
1 divided by 1.01 raised to the power of 5
1 divided by 1.01 raised to the power of 6
1 divided by 1.01 raised to the power of 7
1 divided by 1.01 raised to the power of 8
1 divided by 1.01 raised to the power of 9
1 divided by 1.01 raised to the power of 10
1 divided by 1.01 raised to the power of 11
1 divided by 1.01 raised to the power of 12

This sum is 11.25509

$10,000 / 11.25509 = $888.49

The Nortridge Loan System uses this equation indirectly. A complex algebraic equation has been derived from this summation series, and it is this equation that is directly used by the loan system to derive the payment amount.



Updated: 2017.10.17


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