Modelling Loans with Recurrence Relations and Repayment Calculations

What this note covers

1. Understanding Reducing Balance Loans
2. The Recurrence Relation An+1 = R × A_n − d
3. Constructing an Amortisation Table
4. Calculating Total Interest Paid Over the Life of the Loan
5. Effect of Changing the Repayment Amount
6. Effect of Changing the Compounding Frequency
7. Finding the Required Repayment and Using Technology

7 sections · 14 key terms & formulas · 6 common mistakes