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Unformatted text preview: amount P at the end of one payment period is P (1 + i ) M /4 , and so the interest in that one payment period is P (1 + i ) M /4P = P {(1 + i ) M /41}. Therefore, the interest rate per payment period is (1 + i ) M /41 = 1 1 4 + M M r In the continuous compounding case in Problems 7(c) and 8, M → ∞ , and so the interest rate per payment period is 1 1 lim 4 + ∞ → M M M r = 1 1 lim 4 1 + ∞ → M M M r = 1 4r e Since payment period = ¼ year, the total number of payments in n years is N = 4 n See also textbook, pp. 9192....
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This note was uploaded on 03/18/2010 for the course IOE 201 taught by Professor Dennisblumenfield during the Fall '09 term at University of MichiganDearborn.
 Fall '09
 DennisBlumenfield

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