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A generalization of Makeham's formula for valuation of securities

Published online by Cambridge University Press:  20 April 2012

I. B. Hossack  and
G. C. Taylor
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Extract

One of the most powerful devices in the theory of compound interest is Makeham's formula. The essence of the formula may be stated as follows:

Consider an admitted loan of C bearing interest at rate g per annum (payable pthly in arrear) per unit of admitted capital. The loan is to be repaid by a series of payments each of which contains a capital portion and an interest portion. Let K be the value at rate i per annum effective of all the capital portions.

Type
Other
Information
Journal of the Institute of Actuaries , Volume 101 , Issue 1 , June 1974 , pp. 89 - 95
Copyright
Copyright © Institute and Faculty of Actuaries 1974

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References

Makeham, W. M. On the Solution of Problems connected with Loans repayable by Instalments. J.I.A., 1874, 18, 132–43.Google Scholar