Interest & inflation

Package: FINANCE_PACKAGE. Registered by createEngine(); for a slimmer engine, register it explicitly (see choosing packages).

Interest is what a sum grows by when it is lent or borrowed; inflation is how the value of money changes over the years. Solve works out the interest on a principal, the monthly repayment on a loan, and what a past amount is worth in today’s money.

Interest compounds annually. The principal comes first, then the term and the rate, and a mortgage repayment reads the same way.

interest on 1000 over 3 years at 5% // 157.63
monthly repayment on 200000 over 25 years at 4% // 1,055.67

The term and the rate read in either order, so at 5% over 3 years says the same thing as over 3 years at 5%.

A term shorter than a year

The term carries its unit, so a short-dated facility or a late invoice is written the way it is quoted rather than converted by hand first.

interest on £2,400 over 45 days at 8% // £22.88
interest on £2,400 over 18 months at 8% // £293.69
monthly repayment on £200,000 over 300 months at 4.5% // £1,111.66

Two conventions, both worth stating because they are conventions rather than calendar arithmetic. A month is a twelfth of a year, so 18 months is a year and a half and a 300-month mortgage is a 25-year one, which is what a lender means by those words. Everywhere else in the engine a month is thirty days, so 18 months in years answers 1.48; a term is the deliberate exception. Everything else converts against a 365-day year, so a 45-day term is the same whether those days fall in February or March.

A term that is not a length of time is refused rather than read as a number of years, since a term in kilograms is a mistake and not a quantity.

A bare number is still years, which is what the forms above use.

interest on 1000 at 5% over 3 years // 157.63
monthly repayment on 200000 at 4% over 25 years // 1,055.67

Inflation adjusts an amount into another year’s money, from a bundled consumer price index.

what is $100 from 1990 // $254.55

The inflation figures are an approximation, not a substitute for a real financial calculation.