Generalized formulae for the periodic fixed and geometric-gradient series payment models in a skip payment loan with rhythmic skips

Abstract

Nowadays, the periodic level payment model is the most widely used loan payment model by the banks. In addition, the periodic geometric and linear gradient payment models are available in the financial mathematics books. The arbitrary skip periodic level (or equal) loan payment model was firstly developed by Formato (1992). Formato’s model was extended to the geometric gradient loan payment model by Moon (1994) and the linear gradient model by Eroglu and Karaoz (2002). This loan payment models that have periodic level and geometric gradient series payment with rhythmic skips instead of arbitrary skips have beendiscussed. General formulae have been derived for these models. Numerical examples are solved to show the practical application of the developed payment models on home financing.