Some nontrivial properties of a formula for compound interest

Isaac M. Sonin and Mark Whitmeyer

Finance Research Letters, 2020, vol. 33, issue C

Abstract: We analyze the classical model of compound interest with a constant per-period payment and interest rate. We examine the outstanding balance function as well as the periodic payment function and show that the outstanding balance function is not generally concave in the interest rate, but instead may be initially convex on its domain and then concave.

Keywords: Mortgages; Loan repayment; Compound interest (search for similar items in EconPapers)
JEL-codes: C60 G11 G21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612318307189

DOI: 10.1016/j.frl.2019.06.015

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