The equation for determining an amortized payment is:

Where:
P = Periodic Payment
Pr = Principal
n = Number of Payments
i = Periodic Interest (Interest rate / number of payments per year)

The summation sign tells us to take the sum of the following 12 quotients:

1 divided by 1.01 raised to the power of 1

1 divided by 1.01 raised to the power of 2

1 divided by 1.01 raised to the power of 3

1 divided by 1.01 raised to the power of 4

1 divided by 1.01 raised to the power of 5

1 divided by 1.01 raised to the power of 6

1 divided by 1.01 raised to the power of 7

1 divided by 1.01 raised to the power of 8

1 divided by 1.01 raised to the power of 9

1 divided by 1.01 raised to the power of 10

1 divided by 1.01 raised to the power of 11

1 divided by 1.01 raised to the power of 12

This sum is 11.25509

$10,000 / 11.25509 = $888.49

The Nortridge Loan System uses this equation indirectly. A complex algebraic equation has been derived from this summation series, and it is this equation that is directly used by the loan system to derive the payment amount.