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Tom Kelliher, MA 114
Nov. 14, 2001
Questions on the homework?
``Quiz'' for tomorrow.
Sums of geometric series.
If you had $1,000 in the bank at 12%, how often would you like to have it compounded? How much has your $1,000 grown in a year?
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General formula for k compounding periods in a year:
where FV = future value, 
= principal, and I = annual interest rate.
Make k really large (approaching 
) so that the compounding period
is small --- continuous compounding.
With continuous compounding:
where N is years.
With continuous compounding our $1,000 is worth 
a
year later.
How about value six months later?
Pp. 193--194: 2, 4, 6.