HWK: Re-do Ex. 2.1, assuming interest is compounded quarterly. Should expect FV to be Ans: In comparison to annual compounding in original problem, quarterly compounding should the FV. 4*100 1.085 FV Quarterly = $100 = $100 * 2. Continuous Compounding/Discounting The logical extension of using increasingly more frequent compounding or discounting periods. The limit is reached when theoretically) the time intervals between periods reaches zero, i.e., com- pounding and discounting take place continuously. Without deriving the formulas it turns out that the interest factors are as follows: FVIFC Content (2.3) PVIF Center* (2.4) and the general relationship is: FV, = PV, * et (2.5) where r= the annual interest rate; t=the no. of years, (i.e., for 6 months., t=1/2); and e = 2.7182818