Note: if you cannot remember the recurrence relation formula for a compound interest system, revise notes for 2.2 Analysis of Compound Interest.
Modelling using a Recurrence Relation
- A compound interest system with regular withdrawals describes a system which has a positive interest rate, and withdrawals (negative) made at the end of each compounding period.
- We can use the simple recursion formula to model this system:
Where d<0 and I>0.