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A New Discounting Model for Teaching Finance

12 Pages Posted: 29 Mar 2014  

Jamal Munshi

Sonoma State University

Date Written: March 27, 2014

Abstract

The mathematics of continuous compounding is not limited to the valuation of continuously compounded financial instruments and flow annuities, but rather it is a versatile and robust model that may be used for valuation of all financial contracts normally encountered. It consists of a simple, consistent, coherent and conceptually appealing set of equations that apply without modification to the complete range of applications. The discrete stepwise model of compounding, by contrast, is a redundant innovation that is more complicated than the generalized model and limited in scope.

Keywords: valuation, continuous compounding, time value of money, discounted cash flow, exponential growth

Suggested Citation

Munshi, Jamal, A New Discounting Model for Teaching Finance (March 27, 2014). Available at SSRN: https://ssrn.com/abstract=2417143 or http://dx.doi.org/10.2139/ssrn.2417143

Jamal Munshi (Contact Author)

Sonoma State University ( email )

1801 East Cotati Avenue
Rohnert Park, CA 94928
United States

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