MATH 325 Lecture 1: Chapter 1 (1.1-1.6)
2 Sep 2016
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Document Summary
Interest: the compensation that a borrower of capital pays to a lender of capital for its use. It can be viewed as a form of rent that the borrower pays to the lender to compensate for the loss of use of capital by the lender. Accumulated value: the total amount received after a period of time, t. Period: the unit in which time is measured. Unless otherwise stated, assume the period to be one year. Accumulation function, a (t): the accumulated value at time t 0 of an original investment of 1. Properties: a(0) = 1, for positive interest rates, a(t) is a non-decreasing function, if effective interest accrues continuously, a(t) is continuous. A (t): the accumulated value at time t 0 of an original investment of k. Properties: a(t) = k a(t, a(0) = k, for positive interest rates, a(t) is a non-decreasing function, if effective interest accrues continuously, a(t) is continuous.
