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Contemporry Engineering Economics, 4 th edition, © 2007 Equivalence Calculations with Continuous Payments Lecture No.12 Chapter 4 Contemporary Engineering Economics Copyright © 2006

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Contemporary Engineering Economics, 4 th edition, © 2007 Single-Payment Transactions with Continuous Compounding – Future Worth F 0 N P

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Contemporary Engineering Economics, 4 th edition, © 2007 Practice Problem If you invest $1,000 in a savings account that pays 6% annual interest compounded continuously, what would be the balance at the end of 3 years?

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Contemporary Engineering Economics, 4 th edition, © 2007 Single-Payment Transactions with Continuous Compounding – Present Worth F 0 N P

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Contemporary Engineering Economics, 4 th edition, © 2007 Continuous-Funds Flow

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Contemporary Engineering Economics, 4 th edition, © 2007 Summary of Interest Factors for Typical Continuous Cash Flows with Continuous Compounding

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Contemporary Engineering Economics, 4 th edition, © 2007 Example 4.9 Comparison of Daily Flows and Daily Compounding with Continuous Flows and Continuous Compounding

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Contemporary Engineering Economics, 4 th edition, © 2007 Solution: Daily Transaction: Continuous Flow: The difference between the two methods is only $277.

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