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Fixed Income Mathematics

Author

Listed:
  • István Attila Veres

    (Magyar Nemzeti Bank)

Abstract

Better an egg today than a hen tomorrow, as the saying goes, and this could also be the tenet of modern finance. This is because two cash flows received at different times have different values. 100 forints today is not worth the same as 100 forints one year from now. In fact, it is possible that 100 forints today is worth more than 105 forints will be worth one year from now. This is the time value of money, or more broadly speaking, its consumption value, and it depends on the interest rate for the given period or, in layman’s terms, the yield that can be achieved in a certain period.

Suggested Citation

  • István Attila Veres, 2016. "Fixed Income Mathematics," MNB Handbook, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 1(2), pages 1-78.
    • Handle: RePEc:mnb:handbk:v:1:y:2016:i:2:p:1-78
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    File URL: https://www.mnb.hu/letoltes/mnb-oktatasi-fuzetek-2-eng.pdf
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