You are treating payment to be received as a continuously payable stream of payment from \(t=1\) to \(t=10\) (see figure 1)
but in the question it is given that in year \(t\) the payment is paid continuously at the constant rate of \(r(t)=100 \times 1.05^{(t-1)}\) i.e.
for \(t=1\), the payment is paid continuously during year \(1\) at the constant rate \(r(1)=100\)
for \(t=2\), the payment is paid continuously during year \(2\) at the constant rate \(r(2)=100\times 1.05\)
\(\vdots \)
for \(t=10\), the payment is paid continuously during year \(10\) at the constant rate \(r(10)=100 \times 1.05^9\) (see figure 2)
figure 1
figure 2
Last edited by a moderator: Dec 31, 2016
