Financial Calculator docs

[Jon Lapham]

Terry -

Can you help me with some very simple calculations?

I'm going through your comments in src/calculations/fin.c and distilling 
what you wrote into the docs.

I would like to calculate, by hand, a few things.  For example, what is 
the effective interest rate for a 4% loan compounded monthly with 
monthly payments?

So, I should use eq 19:
ieff = (1 + i/CF)^(CF/PF) - 1

which gives:
ieff = (1 + 4/12)^(12/12) - 1 = 1/3

Right?

But, that means that in this case 12*ieff = i.  I would have thought 
there would be a slight difference between (ieff*12) and i, due to the 
addition of monthly compounding.

In the limiting case of continuous compounding, we use eq 20:
ieff = exp(i/PF) - 1 = exp (4/12) - 1 = 0.3956
...and thus get that 12*ieff = 4.747 (a number larger than 4, as it 
should be).

Obviously I'm thinking about this wrong.  Help!

Thanks, Jon

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  Jon Lapham  <lapham at extracta.com.br>          Rio de Janeiro, Brasil
  Work: Extracta Moléculas Naturais SA     http://www.extracta.com.br/
  Web: http://www.jandr.org/
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