Some applications of linear difference equations in finance with wolfram|alpha and maple

Abstract

The principle objective of this paper is to show how linear difference equations can be applied to solve some issues of financial mathematics. We focus on the area of compound interest and annuities. In both cases we determine appropriate recursive rules, which constitute the first order linear difference equations with constant coefficients, and derive formulas required for calculating examples. Finally, we present possibilities of application of two selected computer algebra systems Wolfram|Alpha and Maple in this mathematical area.

Keywords

• linear difference equation, compound interest, future value of an annuity, periodic payment, computer algebra systems.