When the an annual interest rate ingredients a year, then it would be combined once a year

When the an annual interest rate ingredients a year, then it would be combined once a year

Continuing Compounding interesting

If an annual interest rate compounds semi-annual, then it should be compounded twice a year. If an annual interest rate compounds quarterly, then it should be compounded 4 times per year. If an annual interest rate compounds monthly, then it should be compounded 12 times per year. If an annual interest rate compounds daily, then it should be compounded 365 times per year. And if the compounding period becomes smaller, then the number of compoundings per year, m, becomes larger. In the limit as m goes to infinity, period interest, i, approaches zero. This case is called Continues Compounding of Interest. Using differential calculus, Continues Interest Single Discrete Payment Compound-Amount Factor (F/Proentgen,n) can be calculated as:

r was moderate interest rate compounded constantly letter is amount of distinct valuation periods e try legs away from natural journal (ln) = dos.7183

Example dos-2:

P = 2 , 100 * ( P / F 12 % , 1 ) + 2 , one hundred thousand * ( P / F several % , dos ) + dos , one hundred thousand * ( P / F 12 % , 3 ) = 2000 [ step 1 / elizabeth 0.twelve * 1 ] + 2000 [ step one / age 0.12 * dos ] + 2000 [ step 1 / e 0.12 * step three ] = $ 4 , F = 2 , 100000 * ( F / P 12 % , 2 ) + dos , 100000 * ( F / P a dozen % , step 1 ) + dos , 000 = 2000 * e 0.twelve * 2 + 2000 * elizabeth 0.a dozen * step one + 2000 = $ six ,

(more…)

Read More