Continuous Compounding - Fundamentals of Engineering Economics

Подписаться 26 тыс.

Просмотров 25 тыс.

50% 1

www.EngineerInT... In this tutorial, we will reinforce your understanding of Continuous Compounding. We will begin by defining Continuous Compounding, discuss the general work flow, and then run through an example of something we may see on the exam.

Опубликовано:

27 сен 2024

Ссылка:

Скачать:

Готовим ссылку...

Добавить в:

Мой плейлист

Посмотреть позже

Комментарии : 6

@nitesjung1274 6 лет назад

can you show how to interpolate as well? would be great help!

@khase24 8 лет назад

Hello, In the continous compounding problem where the 8% was compounded continuously for a year, the compounding period was stated as 365 days and this value (365) was not multiplied by the interest rate (8%). However in another example where 1.6% was compounded monthly, the compounding period was given as 12 (clearly understood) however the interest rate was adjusted to 19.2 annually (product of m and i). this is not clearly understood. Also, as a follow up to this question, what if the interest rate of 1.6% was compounded quarterly , the compounding period "m" , will thus be 4 (correct?) if so, will the interest rate also be adjusted to the product of "m" and "i"? Thanks

@miestro123xxx 9 лет назад

how do we know when to convert it to annual effective? Why didnt we use the continuous interest equation i = e^r -1 ?

@EngineerInTrainingTV 9 лет назад

Fent Great question! Nominal interest is the annual interest without considering the effect of any compounding. This is expressed on an annual basis, and is what financial institutions refer to as the annual percentage rate (APR). Effective interest is the annual interest rate taking into account the effect of any compounding during the year. This is the interest rate that is compounded using a time period less than a year. Continuous compounding is when interesting is compounding continuously. This is essentially the effective rate being compounded infinite times per year, thus continuously. You don't need to know this for the exam, but this formula is derived using a limit for the nominal interest formula, where m approaches infinite, thus giving us a formula with an exponential term. If you need any more help let me know! I'm always available at the home of Engineering in Training www.engineerintrainingexam.com/