Simple, compound and continuous interest discounts : a comparative study
José Rigoberto Parada-Daza
This article makes an analytical comparison between simple, compound and continuous interest discount factors. It studies the equivalency relations between the three discount factors. An analysis is performed for a limited time period and of normal economy interest rates. It makes use of the Taylor and Maclaurin series to analytically compare the three factors, then performs a numerical analysis that includes econometric and statistical verification whose results are consistent with those stipulated within the mathematical argument. The central observation is that, regarding interest rates within a normal economy and within a maximum period of three years, the three factors are statistically similar and therefore very close. Some implications are obtained from the analyzed results. -- simple discount ; compound interest ; continuous interest ; discount ; capitalization
Year of publication: |
2013
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Authors: | Parada-Daza, José Rigoberto |
Published in: |
Journal of applied finance & banking. - London : Scienpress, ISSN 1792-6599, ZDB-ID 26142429. - Vol. 3.2013, 1, p. 31-43
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Saved in:
freely available
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