May 12, 2004
The Miracle of Compound Interest
Mathematics, the sciences, and graduate-level economics like the elegance of continuous compounding. After studying the handout, we elected to work with annual compounding.
Posted by bparke at 10:52 PM
Arbitrage Pricing
Suppose the bond sells for 900:
Suppose the bond sells for 920:
The only price that eliminates arbitrage profits is 909.09:
An example:
Posted by bparke at 10:46 PM
