TIME VALUE OF MONEY: APPLICATION AND RATIONALITY- AN APPROACH USING DIFFERENTIAL EQUATIONS AND DEFINITE INTEGRALS

Parvez, Mahbub (2006): TIME VALUE OF MONEY: APPLICATION AND RATIONALITY- AN APPROACH USING DIFFERENTIAL EQUATIONS AND DEFINITE INTEGRALS. Published in: Journal of Mathematics and Mathematical Sciences , Vol. Vol. X, (6 December 2006): pp. 113-121.

Abstract

The time value of money is one of the most important concepts in finance. Money that a firm has in its possession today is more valuable than future payments because today’s money can be invested to earn positive returns in future. The principles of time value analysis have many applications, ranging from setting up schedules for paying off loans to decisions about whether to acquire new equipment. Problems concerning Time Value of Money, which involves calculation of these concepts, are usually solved by algebraic formulae. This paper attempts to solve such problems using differential equations & definite integral techniques and makes a comparison with the results obtained by the traditional method.

• Item Type: MPRA Paper
• Language: English
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods

References

• Brigham, Eugene F, Gapenski, Louis, Ehrhardt, Michael C, (2001), Time Value of Money, Financial Management-Theory and Practice, edition-9. • Gitman, Lawrence J, (2004), Time Value of Money, Principles of Managerial Finance, edition-10. • Prichett, Gordon D & Saber, John C, (2004), Mathematics of Finance, Introduction to calculus,Mathematics with application in Management and Economics, edition-7.