Continuous and Discrete Time Discounting

Initializing live version
Download to Desktop

Requires a Wolfram Notebook System

Interact on desktop, mobile and cloud with the free Wolfram Player or other Wolfram Language products.

The well-known concept of discounting may be implemented as a discrete or continuous process in time, the first representing the common approach in financial institutions. The discrete time discounting term is , where is the discount rate and is the time variable. The expression may be regarded as the present value of one unit of value at time . For , the expression decreases over time. The corresponding continuous time expression is . Note that . The integral is shown as the PV (red) area (the present value of receiving one unit of value each unit of time eternally), while the PV (blue) area represents the sum. You can see the discrete time discounting as the light blue bars and/or a connecting blue line.

Contributed by: Arne Eide (March 2011)
Open content licensed under CC BY-NC-SA


Snapshots


Details

detailSectionParagraph


Feedback (field required)
Email (field required) Name
Occupation Organization
Note: Your message & contact information may be shared with the author of any specific Demonstration for which you give feedback.
Send