Sunday, November 26, 2017

What is (the amount for) Rs 1000 compounded @10% daily or hourly or by seconds for 15 days?

Solution: Rate per day is 10%/365

Amount compounded daily = 1000*(1+10%/365)^15 = 1004.117

Amount compounded hourly = 1000*(1+10%/(365*24)^(15*24) = 1004.118
Amount compounded every sec = 1000*(1+10%/(365*24*3600)^(15*24*3600) = 1004.118

If it is compounded infinitely frequently then the amount for 15 days is

A = P(1+r/(365*n))^(15*n) as n tends to infinity where P =1000 and r = 10%
=P(1+1/S)^(15*n) where  S = 365*n/r and hence tends to infinity
=P(1+1/S)^(S*r*15/365)
=(P(1+1/S)^(S))^(r*15/365) 
=e^(r*15/365) 
=1004.118

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