Note: if you cannot remember how to model reducing balance systems with regular repayments, revise notes for 5.1 Modelling Annuity Investments.
Guidelines to use a Table for Annuity Investments
- Tables provide a convenient method for analysing annuity investments, especially when there are regular systemic changes (e.g. the interest rate or repayments change regularly).
- The columns of the table should list, the compounding period, payment, interest earned, principal addition (i.e. the amount the system has increased during each compounding period) and the balance at the end of the compounding period.
- The principal addition can be calculated by as follows: