The accumulation function a(t) is a function defined in terms of time t expressing the ratio of the value at time t (future value) and the initial investment (present value). It is used in interest theory.
Thus a(0)=1 and the value at time t is given by:
- .
where the initial investment is k.
Examples:
- simple interest:
- compound interest:
- simple discount:
- compound discount:
In the case of a positive rate of return, as in the case of interest, the accumulation function is an increasing function.
Read more about Accumulation Function: Variable Rate of Return
Famous quotes containing the words accumulation and/or function:
“Every political system is an accumulation of habits, customs, prejudices, and principles that have survived a long process of trial and error and of ceaseless response to changing circumstances. If the system works well on the whole, it is a lucky accident—the luckiest, indeed, that can befall a society.”
—Edward C. Banfield (b. 1916)
“To look backward for a while is to refresh the eye, to restore it, and to render it the more fit for its prime function of looking forward.”
—Margaret Fairless Barber (1869–1901)