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# RE: st: RE: Calculating compound interest using loops?

 From Lance Erickson To "statalist@hsphsun2.harvard.edu" Subject RE: st: RE: Calculating compound interest using loops? Date Tue, 10 Jul 2012 19:29:12 +0000

```Thanks. The payment is a constant throughout the life of the loan in this case and is taken directly from the dataset. Did you mean the line

. local interest = 0

isn't necessary? There may be another way to do it, but I included that because without it the line

. gen int`i' = (principal - (payment*`j') + `interest') * rate

evaluates in the first instance to

. gen int1 = (principal - (payment*0) +  ) * rate

If you don't define the local interest with a value it returns a blank which causes a syntax error. An initial value of 0 solves the syntax problem and still provides a correct calculation.

Lance

-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Karen Zhang
Sent: Tuesday, July 10, 2012 12:51 PM
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: RE: Calculating compound interest using loops?

Neat loop! The only thing I an puzzled when I read the thread is that don't we need to local the initial payment or payment _i in the first loop? Just my opinion:) thanks!

Hongyu (Karen) Zhang
510.861.5581
hongyuzhang@berkeley.edu
Class of 2012 | University of California, Berkeley B.A. Economics, B.A. Applied Mathematics

On Jul 9, 2012, at 2:42 PM, Lance Erickson <lance_erickson@byu.edu> wrote:

> Hi Sara,
>
> Something like this (below) should give you a more efficient version of the code you had.
>
> Best,
> Lance
>
>
> // create test data
> clear
> input id principal rate payment
> 1 200000 .005 1199.1
> end
>
> // get amount of monthly interest
> local interest = 0
> forvalues i = 1/360 {
>    local j = `i' - 1
>    gen int`i' = (principal - (payment*`j') + `interest') * rate
>    local interest "`interest' + int`i'"
> }
>
> // get amount of yearly interest
> local l = 1
> foreach k of numlist 12(12)360 {
>    local m = `k' - 11
>    egen int_y`l' = rowtotal(int`m'-int`k')
>    local ++l
> }
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Sara
> Kimberlin
> Sent: Monday, July 09, 2012 1:23 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Calculating compound interest using loops?
>
> Hello,
>
> I'm trying to calculate annual interest payments on a 30-year loan, with interest compounding monthly, and can't figure out how to write the code efficiently.
>
> Pre-defined variables include principal, rate, and monthly_payment.  I know I can manually calculate the amount of interest for each monthly period like this:
>
> gen interest_month1 = principal * rate
>
> gen interest_month2 = (principal - (monthly_payment * 1) +
> interest_month1) * rate
>
> gen interest_month3 = (principal - (monthly_payment * 2) +
> interest_month1 + interest_month2) * rate
>
> gen interest_month4  = (principal - (monthly_payment * 3) +
> interest_month1 + interest_month2 + interest_month3) * rate
>
> ... and so on through interest_month360.
>
> And then I can manually add up the monthly interest to calculate the annual interest for each year, e.g.:
>
> gen interest_year1 = interest_month1 + interest_month2... +
> interest_month12
>
> But I think there must be a way to write this much more efficiently using loops, and I haven't been able to figure it out.  I'd appreciate any help.
>
> Thank you,
> Sara
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```