Equivalence Calculations with Continuous Payments Lecture No.12 Chapter 4 Contemporary Engineering Economics Copyright © 2016

Single-Payment Transactions with Continuous Compounding: Future Worth N P

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? F =? 1 3 2 $1,000

Solution

Single-Payment Transactions with Continuous Compounding: Present Worth F N P

Continuous-Funds Flow

Summary of Interest Factors for Typical Continuous Cash Flows with Continuous Compounding

Example 4.10: Continuous Flows and Continuous Compounding Given: A = $200 per day, r = 6% per year, M = 365 compounding periods per year, and N = 455 days Find: F Note: A 15-month period is 1.25 years.

Solution

Example 4.11: Continuous Flows and Continuous Compounding Given: A = $200 per day, r = 6% per year, M = 365 compounding periods per year, and N = 455 days Find: F Note: A 15-month period is 1.25 years.

Solution Find G:

Solution Find P: