Future Value and Present Value --- Paper (2006)

This document summarizes a research paper that uses system dynamics modeling to analyze the processes of compound interest and discounting over time. Some key points: - It develops stock-flow models to represent the accumulation and subtraction of money value through interest and discounting in both discrete and continuous time. - The models allow exploring how different frequencies of capitalization/decapitalization periods (m) and time steps (h) impact the effective interest and discount rates. - Testing shows the rates vary with m and h, even when the nominal rate is held constant, highlighting the importance of the composition of sub-periods. - A more generic model is proposed that incorporates goal-seeking, integrates/dis