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Interest Rates CT1

A

aaisha

Member
I had a doubt in chapter 3 section 3.1 where they use geometric progression to prove accumlated value of p interest payments is equal to i....can someone give an example and explain the same
 
The sum of the first n terms of a geometric progression with first term a and common ratio r is:

a(1-r^n)/(1-r)

Here there are p terms in the sum, so n = p, the first term a = (i(p)/p)*(1+i)^((p-1)/p), and the common ratio is (1+i)^(-1/p).
 
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