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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Dan Duchardt who wrote (13736)6/27/2001 10:42:10 AM
From: Mathemagician   of 14162
 
I read that as a statement that there is an exact mathematical formula for the limiting case of continuously compounded interest.

There is, A = Pe^(rt). I think we are agreeing violently on the facts. However, it seems that you've apparently misinterpreted my original post -- or I was unclear, whichever you prefer.

The text from that post in question is:
That's a great rule of thumb that everyone should know. It's the easiest way to appreciate the power of compounding. The rule itself comes from the formula for computing the future value of an investment that is compounded continuously. Really, you're dividing ln(2) by the rate as a decimal. ln(2) is about .693, so .70 is used as a close approximation. Multiplying by 100 has the effect of changing the .7 to a 70 and the rate from a decimal to a "percent". Using 72 instead of 70 is like making a rough adjustment from continuously compounded interest to annually compounded interest.

I'm not sure why you think I said that using 70 was more accurate than 72. If it were less accurate it wouldn't make much sense to make an adjustment. Either way, we have wandered way off-topic. PM me if you wish to continue this discussion.

M
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