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

Prepare the journal entry at december 31, On December 31, 2004, Internation...

On December 31, 2004, International Refining Company purchased machinery having a cash selling price of $85,933.75. The company paid $10,000 down and agreed to finance the remainde

Effect of resolution-liquidation of companies, Effect of Resolution The...

Effect of Resolution The consequences of the resolution to wind up are: 1) The company must cease to carry on its business except so far as is necessary for the beneficial win

What do you mean by re - organization, Q. What do you mean by Re - organiza...

Q. What do you mean by Re - organization? Reorganization - This is a change in businesses capital arrangements. If for a CORPORATION there are 7 statutory options for reorganiz

Format for balance sheet, FORMAT FOR BALANCE SHEET The non current asse...

FORMAT FOR BALANCE SHEET The non current assets, current assets and current liabilities sections remain identical to those of a sole proprietorship.  However, the “capital sect

What is bequest, Q. What is Bequest? Bequest - A gift by will of person...

Q. What is Bequest? Bequest - A gift by will of personal property. If bequest is money to the extent it's paid out ofincome from property it is taxable to the recipient. Normal

Determine the investment''s net present value, Question Capital Expenditure...

Question Capital Expenditure Decisions and Investment Criteria Bodmin plc Bodmin plc is a highly profitable electronics company that manufactures a range of innovative produ

Absorption costing, Absorption costing is a cost accounting method that ...

Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

Nikki., Trying to calculate earnings per share. Is net income the same as ...

Trying to calculate earnings per share. Is net income the same as earnings before interest and taxes?

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