question about continue compounding

The answer should be 1-0.913 shouldn't it?

The eX key gives you the answer as (1+rate)
 
nirjraina Wrote:
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> The answer should be 1-0.913 shouldn't it?
>
> The eX key gives you the answer as (1+rate)


this case yu'll get a positive number for interest. since it went down from 44 to 40, it has to be a negative. Secondly, formula is Sfinal = Sintial*e^(rt) --> r=---
 
I never bothered to learn the formula when I was studying. You know that there are diminishing returns to compounding, so picking a huge number will get you to almost the same answer.

Say it's 5% you're trying to solve: divide .05 by 99999999999, add 1, then put it to the power of 99999999999. The real answer should be ever so slightly above what you just calculated.
 
You can also just do a TVM on you calc. I/Y = r/10,000 and N=10,000. you will get something within a few hundredths of a decimal place.
 
So the formula i wrote above is wrong? 2.718^(-4/44)? i got -0.913..
 
If I remember well... it's actually ln(40/44) because the stock's price went down, which give you a negative return of 9.53%
 
Damn... but what is wrong with my equation... 2.718^(-4/44)?
 
to convert hpr to cont comp you use ln formula ....

but if you have cont comp return and you wanted to convert to hpr use the e^(cont comp) formula

read the cfai text, and as far as i remember its in the log normal distribution section
 
i used e^ formula...don't remember what answer i got. but definately ln formula just didnt come in my mind within seconds.
 
i dont remember about the price falls or rises but i think it was the ln forumla bcoz it says compute cont comp return. so we have to use ln forumal...

ln(current price/price paid)
 
i believe it should give same result. ln formula should be a short cut to it.

as far i remember the calc ret as Rcc.
(e^Rcc) - 1 and to solve it use ln of both sides.
 
actually yeah I think i messed this one up...the answer was probably 9.1% not 8.7%
 
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