Time value of money

Describe the basic concepts behind time value of money (why is it necessary), and include in your discussion the concept of discounting and compounding.

Sample Solution

Newton’s Law of Gravity

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Kepler’s laws were an immaculately fundamental explanation of what the planets did, yet they didn’t address why they moved as they did. Did the sun apply a force that pulled a planet toward the point of convergence of its hover, or, as suggested by Descartes, were the planets streaming in a whirlpool of some dark liquid? Kepler, working in the Aristotelian show, theorized not just an inner force applied by the sun on the planet, yet also a second force toward development to shield the planet from moving down. Some speculated that the sun pulled in the planets alluringly.

At the point when Newton had itemized his laws of development and trained them to a segment of his partners, they began endeavoring to relate them to Kepler’s laws. It was clear since an inward force would be relied upon to curve the planets’ ways. This force was most likely an interest between the sun and earth (regardless of the way that the sun quickens considering the attractions of the planets, its mass is mind blowing to such a degree, that the effect had never been perceived by the prenewtonian cosmologists). Since the outer planets were moving bit by bit along more softly twisting ways than the internal planets, their expanding speeds were clearly less. This could be explained if the sun’s capacity was constrained by partition, getting increasingly delicate for the more remote planets. Physicists were in like manner familiar with the noncontact forces of intensity and fascination, and understood that they tumbled off rapidly with detachment, so this showed up great.

In the gauge of a round circle, the size of the sun’s capacity on the planet would should be:


By and by disregarding the way that this condition has the enormity, vv, of the speed vector in it, what Newton expected was that there would be a logically significant fundamental condition for the intensity of the sun on a planet, and that that condition would incorporate the division, rr, from the sun to the article, anyway not the thing’s pace, vv—development doesn’t make objects lighter or heavier.

Condition [1] was right now important piece of information which could be related to the data on the planets basically considering the way that the planets happened to be going in practically indirect circles, yet Newton expected to unite it with various conditions and take out vv logarithmically to find an increasingly significant truth.

To execute vv, Newton used the condition:


This condition would moreover simply be real for planets in practically indirect circles. Associating this to condition [1] to clear out vv gives:


This unfortunately has the manifestation of getting the period, TT, which we expect on relative physical grounds won’t occur in the last answer. That is the spot the round circle case, T∝r3/2T∝r3/2, of Kepler’s law of periods comes in. Using it to clear out TT gives a result that depends just upon the mass of the planet and its great ways from the sun:


F\propto m/r^2 . \shoveright{\text{[force of the sun on a planet of mass}}\\

\shoveright{\text{$m$ far off $r$ from the sun; same}}\\

\text{proportionality consistent for all the planets]}


\begin{multline*} F\propto m/r^2 . \shoveright{\text{[force of the sun on a planet of mass}}\\ \shoveright{\text{$m$ far off $r$ from the sun; same}}\\ \text{proportionality steady for all the planets]}\end{multline*}

(Since Kepler’s law of periods is only a proportionality, the definitive result is a proportionality rather than a condition, so there is no purpose behind sticking to the factor of 4π24π2.)

For example, the “twin planets” Uranus and Neptune have very nearly a comparative mass, anyway Neptune is about twice as far from the sun as Uranus, so the sun’s gravitational force on Neptune is around numerous occasions more diminutive.

The forces between magnificent bodies are a comparative sort of intensity as terrestrial gravity.

Okay, yet what kind of intensity right? It probably was not appealing, since alluring forces have nothing to do with mass. By then came Newton’s mind boggling understanding. Lying under an apple tree and looking toward the moon in the sky, he saw an apple fall. Most likely won’t Earth in like manner pull in the moon with a comparable kind of gravitational force? The moon circles Earth likewise that the planets circle the sun, so maybe Earth’s capacity on the falling apple, Earth’s capacity on the moon, and the sun’s capacity on a planet were the same kind of intensity.

There was a straightforward strategy to test this hypothesis numerically. In case it was substantial, by then we would expect the gravitational forces applied by Earth to follow the equal F∝m/r2F∝m/r2 rule as the forces applied by the sun, yet with a substitute consistent of proportionality fitting to Earth’s gravitational quality. The issue develops now of how to describe the division, rr, among Earth and the apple. An apple in England is closer to specific bits of Earth than to others, anyway expect we take rr to be the acceptable ways from the point of convergence of Earth to the apple, i.e., the scope of Earth (the issue of how to measure rr didn’t develop in the assessment of the planets’ developments considering the way that the sun and planets are so little stood out from the partitions separating them). Calling the proportionality relentless kk, we have:

Fearth on apple Fearth on moon=kmapple/r2earth=kmmoon/d2earth-moon.

Newton’s resulting law says a=F/ma=F/m, so:


The Greek cosmologist Hipparchus had quite recently found 2000 years before that the great ways from Earth to the moon was around various occasions the range of Earth, so if Newton’s hypothesis was right, the accelerating of the moon would should be 602=3600602=3600 events not actually the speeding up the falling apple.

Applying a=v2/ra=v2/r to the reviving of the moon yielded a speeding up that should have been certain on different occasions humbler than 9.8 m/s29.8 m/s2, and Newton was convinced he had opened the riddle of the bizarre force that kept the moon and planets in their circles.

Newton’s law of gravity

The proportionality F∝m/r2F∝m/r2 for the gravitational force on an object of mass mm potentially has an anticipated proportionality consistent for various things if they are being followed up on by the gravity of a comparable article. Clearly the sun’s gravitational quality is unmistakably more critical than Earth’s, since the planets all circle the sun and don’t show any outstandingly colossal expanding speeds achieved by Earth (or by one another). What property of the sun stimulates it its exceptional gravitational? Its inconceivable volume? Its exceptional mass? Its unimaginable temperature? Newton thought about that if the force was comparative with the mass of the article being followed up on, by then it would in like manner look good if the choosing variable in the gravitational nature of the thing applying the force was its own mass. Tolerating there were the same components affecting the gravitational force, by then the principle other thing expected to make quantitative desires for gravitational forces would be a proportionality steady. Newton called that proportionality reliable GG, so here is the completed kind of the law of gravity he guessed.