Appendix 5A
Continuous Compounding and Discounting
APPENDIX 5A
CONTINUOUS COMPOUNDING
AND DISCOUNTING
SOLUTIONS TO PROBLEMS:
4. a. ieff = [1 + (inom/m)m] – 1 = [1 + 0.2/1]1 -1 = 0.2 or 20%
5. Continuous compounding:
Annual compounding:
5A-
Appendix 5A
Continuous Compounding and Discounting
5A-