
The total monthly payment A, interest portion I( k ), and principal portion P(k) are shown in Figure
5.75. Note that the early payments consist almost entirely of interest with only a small amount going
towards principal reduction. As the loan progresses, the portion of each monthly installment used to
reduce the outstanding balance increases. Conversely, the interest portion of each subsequent
payment is less than the previous one.
The total interest paid over the life of the loan is computed in two different ways. The simplest
approach is to compute nA P
0
, the result shown in the ‘‘Display’’ block on the left side of the
Simulink diagram. The