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Education > Math Undergrad > compound intere...
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compound interest; taking the limit

by vinhkan <markrrivet@[EMAIL PROTECTED] > Mar 3, 2008 at 06:27 PM

I cannot follow all the steps in taking the limit of the compound
interest formula below. I lose it when derive the variable m and
substitute it in the equation. If Icould get some help with that it
would be great. I understand everything before and after the m
substitution, except how they derived it.
Take the limit o f A=P(1+ r/n)^nt
first move the limit inside: lim_n^infinity[p(1+r/n)^nt] =
p{lim_n^infinity[(1+r/n)^n]}^t
Do the above to associate the limit with independant variable n.
In the next step the above is = p{lim_m^infinity[(1+1/m)^m]}^rt
They explain in the book the above equation is found by letting m=n/r
which leads to r=nm to establish what they call a towing relation****p
where n goe to infinity and m goes to infinity. In the end they arrive
at the limit of compound interest formule being p{e}^rt. I just really
don't understand how m comes to be.
 




 18 Posts in Topic:
compound interest; taking the limit
vinhkan <markrrivet@[E  2008-03-03 18:27:02 
Re: compound interest; taking the limit
magidin@[EMAIL PROTECTED]  2008-03-03 19:15:04 
Re: compound interest; taking the limit
vinhkan <markrrivet@[E  2008-03-03 19:57:01 
Re: compound interest; taking the limit
magidin@[EMAIL PROTECTED]  2008-03-03 21:08:59 
Re: compound interest; taking the limit
mrivet <markrrivet@[EM  2008-03-04 01:35:57 
Re: compound interest; taking the limit
Stan Brown <the_stan_b  2008-03-03 20:55:25 
Re: compound interest; taking the limit
magidin@[EMAIL PROTECTED]  2008-03-04 02:26:58 
Re: compound interest; taking the limit
Stan Brown <the_stan_b  2008-03-04 14:05:31 
Re: compound interest; taking the limit
The World Wide Wade <a  2008-03-03 20:17:40 
Re: compound interest; taking the limit
Stan Brown <the_stan_b  2008-03-04 14:06:22 
Re: compound interest; taking the limit
magidin@[EMAIL PROTECTED]  2008-03-04 02:25:59 
Re: compound interest; taking the limit
Paul Sperry <plsperry@  2008-03-04 04:39:55 
Re: compound interest; taking the limit
The World Wide Wade <a  2008-03-04 11:12:54 
Re: compound interest; taking the limit
Paul Sperry <plsperry@  2008-03-04 19:29:18 
Re: compound interest; taking the limit
Frederick Williams <&q  2008-03-05 13:14:51 
Re: compound interest; taking the limit
Anon <anon@[EMAIL PROT  2008-03-03 16:06:44 
Re: compound interest; taking the limit
mrivet <markrrivet@[EM  2008-03-04 01:28:03 
Re: compound interest; taking the limit
Anon <anon@[EMAIL PROT  2008-03-03 22:24:15 

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tan12V112 Wed Dec 3 15:20:23 CST 2008.