Financial Calculator docs

[Jon Lapham]

Firstly, wow, this financial calculator is pretty damn nice.

Secondly, I wrote some docs on using it:
http://www.jandr.org/temp/gnucashdocs/loans_calcs1.html

I'll paste the text below (but you can't see my pretty screenshot this 
way).  Any other examples you can think might be instructive?   I put 
this in the "loans" chapter, and I'm thinking of also putting it in the 
investments chapter with an example of using it to calculate predicted 
returns on investments.  Sound good?

Oh, eventually I would like to include the formulas used for the 
calculations.  Anyone have them handy?

===================

7.4. Calculations

The calculations for determining loan specific values, such as periodic 
payment amounts, total payment, or interest rates can be complex. Some 
complicating factors are that there exist different compounding methods 
or that the interest rates may be variable or fixed. To help facilitate 
these calculations, GnuCash has a built-in Financial Calculator. To 
access this, go to Tools -> Financial Calculator.

<image of The Financial Calculator>

The Financial Calculator can be used to calculate any one of the 5 
parameters listed, given the other 4 parameters have been defined. These 
5 parameters are as follows:

   * Payment Periods - the total number of payments.
   * Interest Rate - the yearly interest rate of the loan.
   * Present Value - the current amount owed on the loan
   * Periodic Payment - the amount to pay per period
   * Future Value - the amount owed on the loan when finished

Additionally, you must select the frequency of compounding and the 
frequency of payments. Typically, both of these will be "Monthly", but 
check the specifics of your loan. Next you must specify whether payments 
are made at the beginning or end of a payment period. Finally, you can 
specify whether the compounding is Discrete (ie: uses the compounding 
frequency to calculate) or Continuous. Continuous compounding is the 
limit as the compounding period becomes smaller and smaller until it 
approaches zero.

7.4.1. Example: Monthly Payments

What is your monthly payment on a $100000 30 year loan at a fixed rate 
of 4% compounded monthly?

This scenario is shown in the example image above. To perform this 
calculation, set Payment Periods to 360 (12 months x 30 years), Interest 
Rate to 4, Present Value to 100000, leave Periodic Payment empty and set 
Future Value to 0 (you do not want to owe anything at the end of the 
loan). Compounding is Monthly, Payments are Monthly, assume End of 
Period Payments, and Discrete Compounding. Now, click on the Calculate 
button next to the Periodic Payment area. You should see -473.30.

Answer: You must make monthly payments of 473.30.

7.4.2. Example: Length of Loan

How long will you be paying back a $20000 loan at 10% fixed rate 
interest compounded monthly if you pay $500 per month?

To perform this calculation, leave Payment Periods empty, set Interest 
Rate to 10, Present Value to 20000, Periodic Payment is -500, and set 
Future Value is 0 (you do not want to owe anything at the end of the 
loan). Compounding is Monthly, Payments are Monthly, assume End of 
Period Payments, and Discrete Compounding. Now, click on the Calculate 
button next to the Payment Periods area, you should calculate 48.

Answer: You will pay off the loan in 4 years (48 months).

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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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