Algebraic Method

A A A

DEFINITION

A mathematical means of solving a pair of linear equations. Algebraic method refers to a method of solving an equation involving two or more variables where one of the variables is expressed as a function of one of the other variables. There are typically two algebraic methods used in solving these types of equations: the substitution method and the elimination method.

INVESTOPEDIA EXPLAINS

One algebraic method is the substitution method. In this case, the value of one variable is expressed in terms of another variable and then substituted in the equation. In the other algebraic method – the elimination method – the equation is solved in terms of one unknown variable after the other variable has been eliminated by adding or subtracting the equations. For example, to solve:


8x + 6y = 16


-8x – 4y = -8


Using the elimination method, one would add the two equations as follows:


8x + 6y = 16


-8x – 4y = -8


2y = 8


y = 4


The variable "x" has been eliminated. Once the value for y is known, it is possible to solve for x by substituting the value for y in either equation:


8x + 6y = 16


8x + 6(4) = 16


8x + 24 = 16


8x + 24 – 24 = 16 – 24


8x = -8


X = - 1




RELATED TERMS
  1. Binary Option

    A type of option in which the payoff is structured to be either a fixed amount ...
  2. Boolean Algebra

    A division of mathematics which deals with operations on logical values. Boolean ...
  3. Fibonacci Numbers/Lines

    Leonardo Fibonacci was an Italian mathematician born in the 12th century. He ...
  4. Binomial Tree

    A graphical representation of possible intrinsic values that an option may take ...
  5. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified period of time. ...
  6. Mean-Variance Analysis

    The process of weighing risk against expected return. Mean variance analysis ...
  7. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default beginning in ...
  8. Event Risk

    1. The risk due to unforeseen events partaken by or associated with a company. ...
  9. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted ...
  10. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that ...
Related Articles
  1. Calculating Beta: Portfolio Math For ...
    Investing Basics

    Calculating Beta: Portfolio Math For ...

  2. Quants: The Rocket Scientists Of Wall ...
    Professionals

    Quants: The Rocket Scientists Of Wall ...

  3. Financial Physics:
    Personal Finance

    Financial Physics: "Natural" Market ...

  4. Insure Your Future With A Career As ...
    Home & Auto

    Insure Your Future With A Career As ...

  5. What is the chaos theory?
    Investing

    What is the chaos theory?

  6. Getting On The Right Side Of The P/E ...
    Fundamental Analysis

    Getting On The Right Side Of The P/E ...

  7. What are the odds of getting a perfect ...
    Personal Finance

    What are the odds of getting a perfect ...

  8. Herding Tendencies Among Analysts
    Investing Basics

    Herding Tendencies Among Analysts

  9. Understanding Leveraged Buyouts
    Fundamental Analysis

    Understanding Leveraged Buyouts

  10. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

comments powered by Disqus
Hot Definitions
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  2. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  3. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  4. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  5. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  6. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
Trading Center