This applet computes the interest rate of an investment. You need to enter the payments and earnings R(0),...,R(n). Enter payments as negative values and earnings as positive values. The payment or earning R(i) happens at period i. To enter a value use the topmost field on the right and press "Append".
The program then computes the effective rate for this investment.
An example is a savings account, where R(0),...R(n-1) are positive and R(n) is negative. In this case, the sum of all payments must exceed R(n). Another example is a rent, where R(0) is negative and R(1),...,R(n) is positive. Again the sum of all R(i) must be positive to yield an interest rate. A third example is a loan, where R(i) is positive, and R(1),...R(n) is negative, with R(n) a larger amount (the remaining dept).
The program will compute the interest rate using the stable bisection method and Newton's algorithm.
The function to be solved is
with x=1/q and q=1+P/100. This is the most stable function for Newton's algorithm, which will work in all cases, where the investment breaks into two parts, an initial period of payments and a final period of down-payments.