Explain the term annuity
Explain the term: annuity. How can continuous compounding benefit an investor?
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Annuity is a chain of equal cash flows that is spaced uniformly over time. The increasing affect the number of compounding periods per year is to increase the investment’s future value. If the interest is compounded very frequently, the future value will be more. The smallest number of compounding period is used when we compute continuous compounding.
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Good fellow national bank decided to compete with a savings and loan by offering 30 year fixed rate mortgage loans at 8% annual interest. It plans to obtain the money got the loans by selling one year 6% CD to it's depositors. During first year of operation, good fellows sold it's depositors 1,000,0
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