Financial Calculator for Amortization

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Before we dwell into the program code, we need to know some basic  financial concepts. The term loan amortization means the computation of the amount of equal periodic payments necessary to provide lender with a specific interest return and repay the loan principal over a specified period. The loan amortization process involves finding the future payments whose present value at the load interest rate equal the amount of initial principal borrowed. Lenders use a loan amortization schedule to determine these payment amounts and the allocation of each payment to interest and principal.

The formula to calculate periodic payment is 

         payment=Initial Principal/PVIFAn

where PVIFAn is known as present value interest factor for an annuity . The formula to compute  PVIFAn    is  

     PVIFAn =1/i - 1/i(1+i)n

where n is the number of payments. Normally you can check up a financial table  for the value of PVIFAn   and then calculate the payments manually. You can also use a  financial calculator to compute the values. However, if you already know how to write program in VB, why not create your very own financial calculator.

To calculate the payments for interest, you can multiply the initial principal with the interest rate, then use periodic payment to minus payment for interest.  To calculate the balance at the end of a period, we use the formula 

End-of_year principal=Beginning_of_year principal - periodic payment

The Interface

The code

Dim Num, n As Integer
Dim I, P, PVIFA, r, pmt, PI, PP As Double


Public Sub Cmd_Calculate_Click()

P = Txt_Principal.Text
Num = Txt_Num_payment.Text
r = Txt_Interest.Text
I = r / 100
PVIFA = 1 / I - 1 / (I * (1 + I) ^ Num)
pmt = P / PVIFA
Lbl_Amtpayment.Caption = Round(pmt, 2)

End Sub

Private Sub Cmd_Create_Click()

List_Amortization.AddItem "n" & vbTab & "Periodic" & vbTab & vbTab & "Payment" & vbTab & vbTab & "Payment" & vbTab & vbTab & "Balance"
List_Amortization.AddItem "" & vbTab & "Payment" & vbTab & vbTab & "Interest" & vbTab & vbTab & "Principal"
List_Amortization.AddItem "___________________________________"
Do
n = n + 1
PI = P * I
PP = pmt - PI
P = P - PP
List_Amortization.AddItem n & vbTab & Round(pmt, 2) & vbTab & vbTab & Round(PI, 2) & vbTab & vbTab & Round(PP, 2) & vbTab & vbTab & Round(P, 2)
If n = Num Then
Exit Do
End If
Loop

End Sub

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