Scheduled Transaction Formulas Wrong
Derek Atkins
warlord at MIT.EDU
Wed Aug 31 11:27:27 EDT 2011
"David T." <sunfish62 at yahoo.com> writes:
> While I am on the topic of Scheduled Transactions for mortgages, I note that my scheduled transaction for my mortgage has hard-coded the principal amount and loan length. The formulas read thus:
>
>
> ppmt( 0.04375 / 12.00 : i : 360.00 : 123456.78 : 0 : 0 )
> ipmt( 0.04375 / 12.00 : i : 360.00 : 123456.78 : 0 : 0 )
>
> I am not sure how that might have happened, but I think it means that
> every scheduled transaction's individual amounts are off (since they
> are fixed to the balance at one particular time). Is there something I
> have done wrong here, or am I misunderstanding something? Should there
> be some programmatic way to use the current balance and the number of
> payments remaining on the loan?
This is how the formula works. It determines which instance, i, of the
360 payments you're at and computes the p/i split for that instance.
This is why the SXes cannot handle over-payments of principal, for
exactly the reason you say -- it cannot compute the balance-as-of-date.
This is also why I've been saying for a very long time that the
prerequisite to supporting prepaying is a balance-as-of-date function,
and the ability to enter such a thing in the SX editor.
> Also, I believe that many such loans calculate the interest on a
> day-by-day basis; that doesn't appear to be done here either.
THAT is part of the PPMT/IPMT formulae.
> I am happy to be told how misguided my understanding of this is.
It's only partially misguided. ;)
> David
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-derek
--
Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
Member, MIT Student Information Processing Board (SIPB)
URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
warlord at MIT.EDU PGP key available
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