Lecture no12 equivalence calculations with continuous payment
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Equivalence Calculations with Continuous Payments
Lecture No.12
Chapter 4
Contemporary Engineering Economics
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Contemporary Engineering Economics, 6 edition
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Single-Payment Transactions with Continuous Compounding: Future
Worth
F
0
N
P
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Contemporary Engineering Economics, 6 edition
Park
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Practice Problem
If you invest $1,000 in a savings account that pays 6% annual interest compounded continuously,
what would be the balance at the end of 3 years?
F =?
0
1
2
3
$1,000
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Contemporary Engineering Economics, 6 edition
Park
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Solution
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Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
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Single-Payment Transactions with Continuous Compounding: Present Worth
F
0
N
P
th
Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
All Rights Reserved
Continuous-Funds Flow
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Summary of Interest Factors for Typical Continuous Cash Flows with Continuous Compounding
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Contemporary Engineering Economics, 6 edition
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Example 4.10: Continuous Flows and Continuous Compounding
Given: A = $200 per day, r =
6% per year, M = 365
compounding periods per year,
and N = 455 days
Find: F
Note: A 15-month period is 1.25 years.
th
Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
All Rights Reserved
Solution
th
Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
All Rights Reserved
Example 4.11: Continuous Flows and Continuous Compounding
Given: A = $200 per day, r =
6% per year, M = 365
compounding periods per year,
and N = 455 days
Find: F
Note: A 15-month period is 1.25 years.
th
Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
All Rights Reserved
Solution
•
Find G:
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Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
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Solution
•
Find P:
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Contemporary Engineering Economics, 6 edition
Park
Copyright © 2016 by Pearson Education, Inc.
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