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

+1 vote
1,103 views
asked Aug 10, 2017 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, 2017 by Alexa Psillos (860 points)
selected Sep 14, 2017 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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