Fuzzy Cash Flow Analysis of Fluctuations in Interest Rates at the State Bank of Pakistan using Present Worth Criterion

Abstract

A systematic approach is required to analyze present worth by incorporating annual interest rate fluctuations. This is a key factor in attracting local and foreign investors and maintaining a level of economic advancement. This study primarily focuses on the domain of the State Bank of Pakistan (SBP) and contributes towards achieving three major objectives. The first objective includes modeling interest rate values as triangular fuzzy numbers, and using the Analytic Hierarchy Process (AHP), a Multi-criteria Decision-Making technique (MCDM). Second, the triangular fuzzy interest rates are forecasted over a future timespan. Subsequently, the last objective includes the use of the Present Worth Analysis (PWA) to calculate the final net present value. The results demonstrate a trend in interest rates with net present values of specific future years. This research is a good initiative for the SBP and helpful for both foreign and local investors. The study is novel in that it involves the merging of qualitative and quantitative data. Furthermore, the combination of the forecasting technique, the AHP, fuzzy set theory, and present worth criteria renders a unique approach to formulating present worth. There is no previous research of this magnitude that has been conducted on this topic in a developing country such as Pakistan. This study delves into the annual interest rate fluctuations, providing valuable insights for present worth calculations.