Solving the TVM equation for the interest rate

02122020, 05:25 PM
(This post was last modified: 02122020 05:35 PM by Albert Chan.)
Post: #19




RE: Solving the TVM equation for the interest rate
This formula is based on Pade[1,1], I centered 0, of NFV = F + P + ((1+I)^N1)*(P+M/I)
Solving Pade[1,1] approximated NFV = 0, for 1/I : \( \Large {1\over I} ≈ {\binom{N}{3}M + \binom{N}{2}P \over \binom{N}{2}M + \binom{N}{1}P}  {\binom{N}{2}M + \binom{N}{1}P \over F + P + M N}\) Doing the same example, N=11, F=40000, P=0, M=2564 1/I ≈ (423060/141020)  (141020/11796) = 44102/2949 I ≈ 2949/44102 ≈ 6.687%, which underestimated true rate (6.780%) by tiny 0.093% 

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