Random Variables, the Time Value of Money and Capital Expenditures

Irwin W. Kabak and Joel Owen
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Irwin W. Kabak: New York University
Joel Owen: New York University

Management Science, 1970, vol. 17, issue 3, 142-145

Abstract: This paper treats the following problem. How much money should be invested at time t 0 at an interest rate of I for a time T such that the probability of the funds required "K(T)" exceeding those available "X(T)" equals at most p. That is P{K(T) > X(T)} 0 ) exp{ I(T - t 0 )}. The parameters I, T, X(T) and K(T) are taken to be random variables. The theory to solve the stated problem is presented and solutions to certain specific cases are given.

Date: 1970
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:17:y:1970:i:3:p:142-145

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