Read e-book online An Introduction to the Mathematics of Money: Saving and PDF

By David Lovelock

ISBN-10: 0387344322

ISBN-13: 9780387344324

This is an undergraduate textbook at the easy elements of non-public rate reductions and making an investment with a balanced mixture of mathematical rigor and fiscal instinct. It makes use of regimen monetary calculations because the motivation and foundation for instruments of trouble-free actual research instead of taking the latter as given. Proofs utilizing induction, recurrence kin and proofs through contradiction are lined. Inequalities akin to the Arithmetic-Geometric suggest Inequality and the Cauchy-Schwarz Inequality are used. easy issues in chance and data are offered. the coed is brought to components of saving and making an investment which are of life-long useful use. those contain reductions and checking debts, certificate of deposit, pupil loans, charge cards, mortgages, trading bonds, and purchasing and promoting stocks.

The ebook is self contained and obtainable. The authors stick with a scientific trend for every bankruptcy together with a number of examples and workouts making sure that the coed offers with realities, instead of theoretical idealizations. it truly is compatible for classes in arithmetic, making an investment, banking, monetary engineering, and comparable topics.

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10. Find the IRR for Years Cash Flow 0 −$1,000 1 $2,000 2 . −$1,500 This corresponds to giving someone $1,000 now and $1,500 after two years, in exchange for $2,000 after one year. 3 Internal Rate of Return 33 Solution. Here iirr must satisfy −1000(1 + iirr )2 + 2000(1 + iirr ) − 1500 = 0, which reduces to 2i2irr + 1 = 0, which has no real solutions. Thus, this transaction has no IRR. 11. Find the IRR for Years Cash Flow 0 −$1,000 1 $2,150 2 . −$1,155 This corresponds to giving someone $1,000 now and $1,155 after two years, in exchange for $2,150 after one year.

5. Time diagram for discounting If we consider Fig. 6, then we see that it represents the following cash F F 1 2 ··· 0 F F +P n−1 n P Fig. 6. Mystery time diagram flows: initially an amount P is invested, and at unit time intervals an amount F is received regularly, and finally, after n time intervals, an amount F + P is received, that is, Time 0 Cash Flow −P 1 F 2 F ··· ··· n−1 F n . 2 Time Diagrams and Cash Flows 25 The following net cash flows represent the general case, Time 0 Cash Flow C0 1 C1 2 C2 ··· ··· n−1 Cn−1 n , Cn where Ck (k = 0, 1, .

16. If f (x) is convex on an interval I, if pi ≥ 0 (i = 1, 2, . . , n) where p1 + p2 + · · · pn = 1, and if x1 , x2 , · · · , xn ∈ I, then show that n n pi xi f i=1 ≤ pi f (xi ). 17. Suppose that f (x) is defined on the interval I. If x1 < x2 < x3 are in I and f (x1 ) < f (x2 ) and f (x3 ) < f (x2 ), then show that f (x) is not convex on I. Questions for Review • • • • • • What is inflation? What is deflation? What is meant by the expression “the purchasing power of money”? How is it calculated? What is the real rate of interest?

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An Introduction to the Mathematics of Money: Saving and Investing by David Lovelock


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