Loans, Investments & Annuities

A reducing-balance loan is a...

• simple interest loan with regular repayments

• compound interest loan with regular payments

• simple interest loan without regular payments

• compound interest loan without regular payments

Perpetuity

• The balance of the investment does not change

• An annuity with simple interest accruing each period

• An annuity with compound interest with regular payments

• An annuity with regular withdrawals equal to the interest earned

An annuity involves

• Compound Interest

• Regular Payments or Withdrawals

• Simple Interest

• Stuff happening annually

Compound Interest Formula

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Balance of an Annuity

(Deposit with $0 principal)

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Total Interest for an Annuity

Balance of a reducing annuity

(eg mortgage)

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Balance of an increasing annuity

(eg investment)

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Recursion formula for a Reducing Balance Loan

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