08 compounded continuously we can substitute into

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Unformatted text preview: re value when interest is compounded continuously. 158 PART 2 Input 0.16 Important Financial Concepts Function 2nd ex 1.1735 Next multiply this value by $100 to get the future value of $117.35 as shown at the left. (Note: On some calculators, you may not have to press 2nd before pressing ex.) Spreadsheet Use The future value of the single amount with continuous compounding also can be calculated as shown on the following Excel spreadsheet. 100 Solution 117.35 The future value with continuous compounding therefore equals $117.35. As expected, the continuously compounded value is larger than the future value of interest compounded semiannually ($116.99) or quarterly ($117.16). Continuous compounding offers the largest amount that would result from compounding interest more frequently than annually. Nominal and Effective Annual Rates of Interest nominal (stated) annual rate Contractual annual rate of interest charged by a lender or promised by a borrower. effective (true) annual rate (EAR) The ann...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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