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
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