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Solving the TVM equation for the interest rate
04-16-2018, 05:00 AM
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RE: Solving the TVM equation for the interest rate
(04-15-2018 04:37 PM)Ángel Martin Wrote:  I looked into the very same subject when I wrote the HP-41 MCODE version of TVM$.

I don't recall exactly how or why I came to this, but the expression I used for the initial guess was:

i0 = [ abs( PV + n*PMT + FV) ]^1/n

Surely this isn't the best, or may be not even sensible - but it works just fine for all tests and still holding up nicely.

There is somewhere in the calculator literature a very good approximation. I don't remember where. I spent some time trying to figure out how it worked and finally realized that it was a continued fraction approximation to the solution. It's only got 5 or 6 terms and this suitable as a starting point. The problem is that it does not tell you whether there is a solution for the given input. There can be 0, 1, 2 or more interest rates that generate the same income stream for given starting values.
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RE: Solving the TVM equation for the interest rate - ttw - 04-16-2018 05:00 AM



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