Continuous compounding, Financial Accounting

Assignment Help:

In Section we had established an association among the effective and nominal rate of interest where compounding arise n times a year that is as given:

r = (1 +  k/m )m - 1

Rearranging equation a10, this can be specified as:

r = [(1 +  k/(m/k))m/k ]k- 1

Let us substitute m/k by x from Eq (a11)

r = [(1 + 1/x )k] - 1

In continuous compounding ∞ → m that implies ∞ →∞  in Eq 12.

1729_Continuous Compounding.png

= e = 2.71828...

By equation (a12) results in

R = ek-1

⇒ (r + 1) =  ek

Thus the future value of an amount when continuous compounding is done is as follows:

 FVn = PV * ekm     


Related Discussions:- Continuous compounding

Cash flow statement, In additional information depreciation of two years is...

In additional information depreciation of two years is given. What is the treatment of it while preparing fixed assets account.

Conversion into a company-partnership, CONVERSION INTO A COMPANY The part...

CONVERSION INTO A COMPANY The partners may convert their business and trade in form of a company. This may be due to some of the advantages a company has over a partnership. E.g.

Members voluntary winding up-liquidation of companies, Members Voluntary Wi...

Members Voluntary Winding Up The company may be wound up by the members themselves without reference to the creditors, if the company is solvent. 1) Declaration of solvency

Calculate the cash flow-agency costs, Tom Scott is the owner, president, an...

Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40

State the benefits of accounting information, State the Benefits of account...

State the Benefits of accounting information Benefits of accounting information ultimately decline. Cost of providing information, though, will rise with every additional piec

Closing entries, Closing Entries: Expenses Below is a list of accounts with...

Closing Entries: Expenses Below is a list of accounts with corresponding ending balances. Account: Account Balance a.Insurance Expense: $1,300 b.Cash: 750 c.Accounts Receivable: 4,

Ownership and control related issue of debt, Q. Ownership and Control relat...

Q. Ownership and Control related issue of debt? Issuing equity is able to have ownership implications for a company particularly if the finance is raised by a placing or offer

Real estate mortgage investment conduit, Real Estate Mortgage Investment Co...

Real Estate Mortgage Investment Conduit (REMIC) - An entity which holds a fixed pool of mortgages and issues multiple classes of interest in itself to investors. A qualified REMIC

Calculate the total cash flow, Oswald Corporation reported the following in...

Oswald Corporation reported the following information on operations for 2009: Revenue = $2,000 Cost of goods sold = $850 Operating expenses =$395 Depreciation =$248

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd