[Numpy-discussion] Definitions of pv, fv, nper, pmt, and rate
Mon Jun 8 23:51:46 CDT 2009
--- On Mon, 6/8/09, Skipper Seabold <email@example.com> wrote:
> I forgot the last payment (which doesn't earn any
> interest), so one more 100.
So in fact they're not in agreement?
> pretty soon. I don't have a more permanent reference
> for fv offhand,
> but it should be in any corporate finance text etc.
> Most of these
> type of "formulas" use basic results of geometric series to
Let me be more specific about the difference between what we have and what I'm finding in print. Essentially, it boils down to this: in every source I've found, two "different" present/future values are discussed, that for a single amount, and that for a constant (i.e., not even the first "payment" is allowed to be different) periodic payment. I have not been able to find a single printed reference that gives a formula for (or even discusses, for that matter) the combination of these two, which is clearly what we have implemented (and which is, just as clearly, actually seen in practice).
Now, my lazy side simply hopes that my stridency will finally cause someone to pipe up and say "look, dummy, it's in Schmoe, Joe, 2005. "Advanced Financial Practice." Financial Press, NY NY. There's your reference; find it and look it up if you don't trust me" and then I'll feel like we've at least covered our communal rear-end. But my more conscientious side worries that, if I've had so much trouble finding our more "advanced" definition (and I have tried, believe me), then I'm concerned that what your typical student (for example) is most likely to encounter is one of those simpler definitions, and thus get confused (at best) if they look at our help doc and find quite a different (at least superficially) definition (or worse, don't look at the help doc, and either can't get the function to work because the required number of inputs doesn't match what they're expecting from their text, or somehow manage to get it to work, but get an answer very
different from that given in other sources, e.g., the answers in the back of their text.)
One obvious answer to this dilemma is to explain this discrepancy in the help doc, but then we have to explain - clearly and lucidly, mind you - how one uses our functions for the two simpler cases, how/why the formula we use is the combination of the other two, etc. (it's rather hard to anticipate, for me at least, all the possible confusions this discrepancy might create) and in any event, somehow I don't really think something so necessarily elaborate is appropriate in this case. So, again, given that fv and pv (and by extension, nper, pmt, and rate) have multiple definitions floating around out there, I sincerely think we should "punt" (my apologies to those unfamiliar w/ the American "football" metaphor), i.e., rid ourselves of this nightmare, esp. in light of what I feel are compelling, independent arguments against the inclusion of these functions in this library in the first place.
Sorry for my stridency, and thank you for your time and patience.
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