FIXED INTEREST RATE COMPARE WITH ANNUITY INTEREST RATE

By
I Made Wijana
Department Of Accounting, Bali State Polytechnic

ABSTRACT
Flat interest rate and annuity interest rate, which is usually implemented in credit
program, has a relationship. If we set annuity interest rate as an independent variable and
flat interest rate as an dependent variable, then the relationship between the two variable
can be described explicitly as: it = 1/[{1-(1+ ia)-n}/ ia ] -1/n, conversely if we set flat interest
rate as an independent variable and annuity interest rate as an dependent variable, then the
relationship between the two variable must be described by an implicit function G(i t, ia )=0
,where G(it, ia )=1- {it +1/n}{1-(1+ ia)-n}/ ia.
In calculating the t relationship between flat interest rate (it) and annuity interest
rate (ia) , where it is known, we can implement deterministic method, for example false
position method ,or random method. Functional relationship implicitly between it and ia,
can be described by a chart, after we implement numerical approach for example false
position method to find a table of relationship between it and ia.
The equivalency between it and ia, depend on n and it . For a certain it, if n=1 or
n→ ∞ then ia = it. Also, for a certain n if it → ∞ then ia = it
Key Words : flat interest rate, annuity interest rate, deterministic, random.