I know the fixed would be something like L=M-P*(I/1200). that is for rate payment for each month. M is the monthly payment, P is total amount (or for the residue for next months) and I is interest rate. Now how would I calculate if the interest rate changes in one of the months? Any help is appreciated, sources, formulas, algorithms, etc... :-)
What is the formula for credit repayment with variable rate?
In theory the outstanding balance should equal the present value of the remaining payments.
So if the interest rate changes, adjust the present value calculations .
For instance if you have 20 payments to make and calculate a payment based on an interest rate of 5% but after 10 payments the interest rate changes. It seems appropriate to me that a logical path to follow is to present value the remaining payments at the 5%, then recalculate a new payment based on the new interest rate.
If you receive n payments of 1 the present value =
[Note: v = 1/(1+i) where i is interest
(1 - v^n) / i
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