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If r per annum is the rate at which the principal A is compounded annually, then at the end of k years, the money due is
Q = A (1 + r)k
Suppose compounding is done continuously. i.e. at every instant the principal A is compounded at R per annum. Then,
Q = A eRk
The relationship between R and r is given by the following reasoning:
A (1 + r)k = A eRk
Example
If R = 5.25%, then ln(1 + r) = 5.25% or r = 5.39%
Suppose Rs.100 is being compounded annually at the rate of 10% per annum. What is the future value of Rs.100 at the end of the third year? What is the effective continuously compounded rate of interest? What is the future value of Rs.100 at the end of the third year, using this interest rate?
FV(Rs.100) = 100 x (1.10)3 = 133.1
If r = 0.1, then the continuously compounded rate of interest R is given by
R = ln(1 + 0.1) = 0.0953
FV(Rs.100) = 100 e0.0953 x 3 = 100 x 1.331 = 133.1
you are driving on a freeway to a tour that is 500 kilometers from your home. after 30 minutes , you pass a freeway exit that you know is 50 kilometer from your home. assuming that
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a. Cassie has seven skirts, five blouses, and ten pairs of shoes. How many possible outfits can she wear? b. Cassie decides that four of her skirts should not be worn to school.
if a,b,c are in HP
Definition 1. Given any x 1 & x 2 from an interval I with x 1 2 if f ( x 1 ) 2 ) then f ( x ) is increasing on I. 2. Given any x 1 & x 2 from an interval
2
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Q. What is the probability of choosing a red ball? Ans. A box contains a red, blue and white ball. Two are drawn with replacement. (This means that one ball is selected, i
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