cannot solve the problem got Stuck in Compounded Continously
can someone define Compounded Continously How its done in calci
praveen kumar maliBeginner
COMPOUNDED CONTINUOSLY CANNOT UNDERSTAND
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Is answer option B?
If yes,
Initially make continuously compounded to effective rate that will be 3.04545
Then put pv-1000000
I/y-3.04545
N-4.
Cpt-fv-1127496.852 (sto-1)
Now for daily compounding 3/365-0.00822
As I/y.
Pv-1000000
N-365*4=1460
Cpt-fv-1127491.292(sto2)
Sto1-sto2.
5.55994 approx 6
Case 1:
SAR = 3% compounded continuously
To calculate EAR; (CALCI FUNCTIONS)
0.03 2ND eˣ -> 1.0305
(1.0305 – 1) * 100 = 3.0455 = EAR
Find FV; (CALCI FUNCTIONS)
2nd CLR TVM
3.0455 I/Y
4 N
-1,000,000 PV
CPT FV -> FV = 1,127,496.852 (STO 1)
Case 2:
SAR = 3% compounded monthly
Find FV; (CALCI FUNCTIONS)
2nd CLR TVM
3/12 I/Y
4*12 N
-1,000,000 PV
CPT FV -> FV = 1,127,491.292 (STO 2)
now,
RCL 1 – RCL 2 = 5.55994 (APPROX. 6)
Answer. B