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ARTÍCULO
TITULO

DEBT AMORTIZATION AND SIMPLE INTEREST: THE CASE OF PAYMENTS IN AN ARITHMETIC PROGRESSION

Clovis José Daudt Lyra Darrigue Faro    

Resumen

With the argument that, necessarily, compound interest implies anatocism, the Brazilian Judiciary has been determining that, specially for the case of  debt amortization in accordance with the so called Tabela Price, when we have constant payments, the use of simple interest. With the same determination occurring in the case of the Constant Amortization Scheme, when the payments follow arithmetic progressions.  However, as simple interest lacks the property of time subdivision, it is shown that as in the case of constant payments, the adoption of simple interest in the case of payments following an arithmetic progression results in amortization schemes that are financially inconsistent. In the sense that the determination of the outstanding principal in accordance with the prospective, retrospective and of recurrence methods lead to conflicting  results. To this end, four different variations of the use of simple interest are numerically analyzed.

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