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Java Forum / General / August 2007loan amortization
ok i decided to do a loan amortization program that will take, as input, loan amount, loan length (in years) and annual interest rate. I have done all the coding but when it comes to formulas I'm totally lost. I need to display Interest, Principal, and Balance on month to month bases. Like i said the code is all done...well all except the math part and math has never been my strong side. you can see it on my blog here: http://javacodee.blogspot.com/ any help is welcome.... >ok i decided to do a loan amortization program that will take, as >input, loan amount, loan length (in years) and annual interest rate. >I have done all the coding but when it comes to formulas I'm totally >lost. I need to display Interest, Principal, and Balance on month to >month bases. Think first principles. all you need in the way of formulae is interest = principal * rate. Work out each month, and wrap into a loop. It only gets tricky if you don't have a loop.  SignatureRoedy Green Canadian Mind Products The Java Glossary http://mindprod.com >> ok i decided to do a loan amortization program that will take, as >> input, loan amount, loan length (in years) and annual interest rate. [quoted text clipped - 6 lines] > Work out each month, and wrap into a loop. It only gets tricky if you > don't have a loop. Beware round-off errors. Direct analytical computation might be more reliable than looping, but numerics is a tricky area. Google and Wikipedia will yield up the precise formulae right quickly. SignatureLew >Beware round-off errors. If you use doubles, you have about 14 significant digits. Let's say your are working on a $100,000.00 mortgage. That gives you 7 places for fractions of a penny. Your loop will go no more than 50 years. So I think it should be safe for a novice to close his eyes and ignore roundoff errors. When I worked for Univac back in the 1970s, I was dismayed to discover that every financial institution in the USA computes interest a different way, and that way is generally considered a secret. I worked on a banking package called First/90 that allowed banks to plug in their own interest-computing module, with no default. I would hope by now consumer advocates would have managed to enforce a uniform algorithm for both savings accounts and mortgages. Einstein made a comment that the most powerful force in the universe is compound interest. Sean B. Carroll in "the Making of the Fittest" explains that the impressive results of evolution are based on a similar compound interest effect. Even the tiniest compound interest rate over time becomes enormous in effect. Jesus and Mohammed railed against compound interest (called usury in their time) knowing how over time it would tear the social fabric apart by dividing society into extreme haves and have nots. SignatureRoedy Green Canadian Mind Products The Java Glossary http://mindprod.com > I would hope by now consumer advocates would have managed to enforce a > uniform algorithm for both savings accounts and mortgages. <http://en.wikipedia.org/wiki/Compound_interest> SignatureLew > >Beware round-off errors. > If you use doubles, you have about 14 significant digits. Let's say > your are working on a $100,000.00 mortgage. That gives you 7 places > for fractions of a penny. Your loop will go no more than 50 years. So > I think it should be safe for a novice to close his eyes and ignore > roundoff errors. Depending on your customer, you'd better not do that. If you have different programs (say legacy, when you are talking about 50 years) that slightly round different at certain points, maybe used a different number of significant digits, etc., you will find a whole bank looking for the missing penny. An insurance company insider told me that they once spotted a penny difference in calculations and a good part of the company went looking for it. It later turned out that some ingenious technician (programmer?) booked fractions of pennies of many transactions onto his account or the pennies, when there was a full penny difference. Since a lot of accounts were involved, there was a steady money flow (at the time of the tale the fraud suit was pending). The insider also said that they wouldn't have made such a fuss, if this had involved a million or so (probably tongue in cheek). [If you are an urban legend/FOAF hunter: I have long lost contact with the man, so I can't prove this anymore. It was in the late 80's.] If, on the other hand, you are writing a program estimating your grandson's dividend for certain saving plans, 14 digits should suffice. > When I worked for Univac back in the 1970s, I was dismayed to discover > that every financial institution in the USA computes interest a [quoted text clipped - 4 lines] > I would hope by now consumer advocates would have managed to enforce a > uniform algorithm for both savings accounts and mortgages. I don't know. Consider the legacy problem above. Banks and insurance companies are very conservative. Michael > An insurance company insider told me that they once spotted a penny difference > in calculations and a good part of the company went looking for it. It later [quoted text clipped - 6 lines] > legend/FOAF hunter: I have long lost contact with the man, so I can't prove > this anymore. It was in the late 80's.] http://www.snopes.com/business/bank/salami.asp > > An insurance company insider told me that they once spotted a penny > > difference [quoted text clipped - 8 lines] > > this anymore. It was in the late 80's.] > http://www.snopes.com/business/bank/salami.asp Yes, I've thought such legends must exist in the wild. It doesn't say whether some are true or not, though. Probably difficult to dis-/prove, unless someone has access to DB queries on court records willing to search. Michael >>>An insurance company insider told me that they once spotted a penny >>>difference [quoted text clipped - 15 lines] > > Michael I was told the penny rounding story in 1970. I don't know whether it was true or not. Patricia > Jesus and Mohammed railed against compound interest (called usury in > their time) knowing how over time it would tear the social fabric > apart by dividing society into extreme haves and have nots. Any interest, in fact. And the Torah and Aristotle also condemn it. SignatureJohn W. Kennedy "Those in the seat of power oft forget their failings and seek only the obeisance of others! Thus is bad government born! Hold in your heart that you and the people are one, human beings all, and good government shall arise of its own accord! Such is the path of virtue!" -- Kazuo Koike. "Lone Wolf and Cub: Thirteen Strings" (tr. Dana Lewis) Sirius <katics1@yahoo.com> wrote in news:1186553020.976502.149460 @j4g2000prf.googlegroups.com: > ok i decided to do a loan amortization program that will take, as > input, loan amount, loan length (in years) and annual interest rate. [quoted text clipped - 3 lines] > math part and math has never been my strong side. you can see it on > my blog here: http://javacodee.blogspot.com/ any help is welcome.... Google is your friend. Googling "amortization formula" should provide you the information you require. Regards Signature--------------------------------------------------------------------- Greg R. Broderick usenet200707@blackholio.dyndns.org A. Top posters. Q. What is the most annoying thing on Usenet? --------------------------------------------------------------------- > ok i decided to do a loan amortization program that will take, as > input, loan amount, loan length (in years) and annual interest rate. [quoted text clipped - 3 lines] > math part and math has never been my strong side. you can see it on > my blog here: http://javacodee.blogspot.com/ any help is welcome.... I've taken a quick look at your code, and have a suggestion that may help you. Separate the calculation from the string parsing. Have a method that calculates the monthly payment given loan amount, loan length, and interest rate. Test that method, in isolation, feeding it easy data. You can build test cases by picking the monthly payment, duration, and interest rate, and calculating the loan amount working backwards month by month from the zero final balance. Patricia > > ok i decided to do a loan amortization program that will take, as > > input, loan amount, loan length (in years) and annual interest rate. [quoted text clipped - 16 lines] > > Patricia thanks everyone for your input i will take everything into consideration > > > ok i decided to do a loan amortization program that will take, as > > > input, loan amount, loan length (in years) and annual interest rate. [quoted text clipped - 19 lines] > thanks everyone for your input i will take everything into > consideration hi all, i fot it to work now....it turns out that my formula for the monthlyPaymnet wasn't correct and when i fixed that everything worked out fine... thanks for everyone's help again Free MagazinesGet these publications absolutely FREE for up to 12 months. 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