APPENDIX E
The Use of Mathematics in Finance
CORPORATE VALUATION FOR PORTFOLIO investment requires the director or indirect use of mathematics. As mathematician Gilbert Strang has noted, “The purpose of mathematics is to understand and explain patterns”1—and what could be more important for valuation? Analysts typically use a calculator with net present value, internal rate of return, yield to maturity, and natural logarithm and exponential functions. 2 But that is just the beginning. Value-minded investors need to understand how to think mathematically as well. We offer this primer on financial math for that purpose.

Types of Mathematics Used in Corporate Valuation

Types of math used in finance include arithmetic, algebra, and calculus. Corporate ...

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