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I am working with the formula that calculates the present value annuity factor given that interest is compounded continuously
PVIFA = [1 - e^-in]/[e^i - 1]
I am not able to solve for i or n for the reason that I am not getting the e^in cornered on the left side of the equation
After multiple tries the best I have gotten is
[e^in - 1] / [e^in {e^i-1} ] = PVIFA
Any suggestions on how to proceed for simplifying this further
Equations of type Ax = B(1 + x)^n cannot be solved directly for x; must be solved numerically.
Hi Wilmer :)Quote:
Originally Posted by Wilmer
It's only now that I read your reply
After posting the question here I went back with paper and pencil to see what I could do with the equation
And as you stated in your reply, finding i out of this equation was not possible just as it was not possible to find i from the PVIFA equation for discrete compounding of interest PVIFA = [1-(1+i)^-n]/i
However I was able to find n from the equation I posted in my last. For finding interest rate I had to go back to Newton Raphson method to find i out of the equation for PVIFA with continuous compounding of interest. See this link for PVIFA Calculator
Now a question I posted a couple of days ago, may be I was not able to phrase it correctly so let me ask again
As with finding the present value annuity due factor when interest is compounded discretely we simply multiply PVIFA by (1+i) so can I use this same principle when finding present value annuity due factor when interest is compounded continuously by multiplying the PVIFA with e^r to make it as follows
PVIFA = e^r[1 - e^-in]/[e^i - 1]
Does this make sense