Derive an equation for p0 as a function

Reference no: EM13188771

A loan of P0 which accrues an interest i per period is to be paid of with a uniform gradient annuity with initial payment A and gradient G over n periods. Thus, the change in the amount of principal is governed by

Pn =Pn-1(1+i)-A0 -(n-1) G (1)

Find expressions for P1, P2, P3 and P4 as functions of i, P0, A0 and G. From these results determine/guess/infer an expression for Pn as functions of i, P0, A0 and G. Show that the expression you guessed is correct by showing that it satisfies eq. 1. If the loan is paid of in n payments, derive an equation for P0 as a function of A0, G and n.

Reference no: EM13188771

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