Article
Version 1
Preserved in Portico This version is not peer-reviewed
Amortizing Loans Under Arbitrary Discount Functions
Version 1
: Received: 22 February 2024 / Approved: 22 February 2024 / Online: 22 February 2024 (09:50:36 CET)
How to cite: Mari, C. Amortizing Loans Under Arbitrary Discount Functions. Preprints 2024, 2024021291. https://doi.org/10.20944/preprints202402.1291.v1 Mari, C. Amortizing Loans Under Arbitrary Discount Functions. Preprints 2024, 2024021291. https://doi.org/10.20944/preprints202402.1291.v1
Abstract
A general methodology for loan amortization under arbitrary discount functions is discussed. It is shown that it is always possible to uniquely define a scheme for constructing the loan amortization schedule with an arbitrary assigned discount function. It is also shown that even if the loan amortization is carried out from the sequence of principal payments and the sequence of accrued interest, the underlying discount function can be uniquely determined at the maturities corresponding to the installment payment dates. As a special case of the proposed approach, we derive the amortization method according to the law of simple interest.
Keywords
discount function; amortizing loans; outstanding balance; amortization schedule; compound interest; simple interest.
Subject
Business, Economics and Management, Finance
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Comments (0)
We encourage comments and feedback from a broad range of readers. See criteria for comments and our Diversity statement.
Leave a public commentSend a private comment to the author(s)
* All users must log in before leaving a comment