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xls-66: fix equation (23) to include managementFee_overpayment #495

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xls-66: fix equation (23) to include managementFee_overpayment in pri…
Tapanito Mar 11, 2026
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Merge branch 'master' into tapanito/fix-overpayment-principal-formula
Tapanito Mar 11, 2026
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7 changes: 3 additions & 4 deletions XLS-0066-lending-protocol/README.md
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Expand Up @@ -1764,17 +1764,16 @@ $$
#### 5.2 Principal Reduction

$$
principalPortion = overpaymentAmount - overpaymentInterest_{net} - overpaymentFee \quad \text{(23)}
principalPortion = overpaymentAmount - overpaymentInterest_{net} - managementFee_{overpayment} - overpaymentFee \quad \text{(23)}
$$

**Where:**

- `overpaymentAmount` = The excess funds after all periodic payments are settled (formula 19)
- $overpaymentInterest_{net}$ = Gross overpayment interest minus management fee (formula 21)
- $overpaymentInterest_{net}$ = Net overpayment interest owed to the Vault (formula 21)
- $managementFee_{overpayment}$ = Management fee on the overpayment interest (formula 14)
- `overpaymentFee` = Percentage-based fee on the overpayment amount (formula 22)

**Note:** The management fee has already been deducted from $overpaymentInterest_{net}$, so it does not appear as a separate term in this formula.

#### 5.3 Re-amortization Value Change

The pseudo-code in [Appendix A-3.3](#a-33-pseudo-code) handles re-amortization by preserving historical rounding errors while applying the overpayment to reduce the principal. The process follows these logical steps:
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