Level Payment vs. Sinking Fund Loans

Below is a document explaining how to derive formulas for the most basic level payment and sinking fund loans. This is a simple introduction, as I’m currently working on a more detailed analysis of the benefits/drawbacks to various types of loans (including installment, variable rate, etc.) using empirical data and considering various scenarios, like the option to refinance and varying interest rates.  I used the results from my post on annuity formulas to simplify the derivation, so if you’re confused about how I got from one step to the next, check there!

Level Payment and Sinking Fund Loans

About schapshow

Math & Statistics graduate who likes gymnastics, 90s alternative music, and statistical modeling. View all posts by schapshow

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