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Continuous compounding & Present value

Hello 

anyone knows how to calculate continuous compounding and present value by BA II PLUS PROFESSIONAL ?

example 2-4 Wiley books page no 144

TIA 

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2nd LN gives you ex, which is what you need for continuous compounding/discounting.

Simplify the complicated side; don't complify the simplicated side.

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BA II Plus Pro doesnt have a function that accepts a continuously compounded rate as an imput to use for built-in TVM calculation. if you absolutely want to use the TVM buttons, you could first convert the continuously compounded rate to an effective annual rate and use that rate instead. it would be more convenient to just recall that, if you have a cashflow of amount M at time t (in years), the present value is M x exp (-r x t)

for example, if M is 100, r is 5% compounded continuously and the cashflow is at 5 months, then

PV = 100 x exp (- .05 x 5/12) = 97.94 (rounded up)

i strongly recommend that you learn the fundamentals well and not rely too much on the TVM functions in the calculator.

on a side note: to calculate exp using the regular ex button, you need to type the number first and then the ex button - this is the opposite of many regular calculators, where you type the ex button first.

not a CFA wrote:
on a side note: to calculate exp using the regular ex button, you need to type the number first and then the ex button - this is the opposite of many regular calculators, where you type the ex button first.

On every calculator I’ve seen, you put in the number, then hit ex.

Which calculators have you seen that do it the other way round?

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

S2000magician wrote:

not a CFA wrote:
on a side note: to calculate exp using the regular ex button, you need to type the number first and then the ex button - this is the opposite of many regular calculators, where you type the ex button first.

On every calculator I’ve seen, you put in the number, then hit ex.

Which calculators have you seen that do it the other way round?

TI-30 XS

hit 2nd > e^x > number

Casio fx-300 ms

shift > e^x > number

Ti- plus calculators also require hitting e^x first (this is at least true for Ti-84 plus, but i dont think they have changed for later versions)

You can approximate continuous compounding with the TVM worksheet by using an extremely high value for C/Y, e.g 525,600 or 999,999. 

“Mmmmmm, something…” - H. Simpson