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difference between a "simple" continuous payment and an increasing/decreasing continuous stream of payment.

+1 vote
962 views
asked Aug 10 in BUS 2016H - Financial Mathematics by anonymous

Could you please help me with the difference between a "simple" continuous payment and an increasing/decreasing continuous (not piecewise) stream of payments. I think I kind of have an idea of the concepts, but when I check the two formulae, they look the same to me- both with an integral, p(t) and e^s.

1 Answer

+3 votes
answered Sep 1 by Alexa Psillos (640 points)
selected Sep 14 by Richard van Gysen
 
Best answer

Hotseat Q.pdf (0,3 MB) 

Hello, my answer is in the attached PDF. I assumed that by "simple continuous payment" you meant a continuously payable annuity (where the payment stream is constant throughout the term of the annuity). 

The formulae are the same, however for a continuously payable annuity, p(t) = 1, because the rate of payment is constant (neither increasing nor decreasing).

If this wasn't what you meant please comment further on this answer. 



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