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e term in Financial equation

  • 27-08-2014 2:26pm
    #1
    Eire-Dearg
    Registered Users, Registered Users 2 Posts: 8,900 ✭✭✭


    I'm trying to figure out how the equation in the red square is calculated. Is something substituted for e?

    qeo75F0.png

    The question and answer is here (H 10-7) http://web.mit.edu/15.415D/www/pp08.pdf

    I need it for an exam coming up and I can't for the life of me figure out how they solve this.


Comments

  • #2
    Delphi91
    Registered Users, Registered Users 2 Posts: 1,501 ✭✭✭Delphi91


    It works out pretty ok.

    e is a numerical constant, similar to pi, with a value of 2.71828

    Now 12% = 12/100 therefore 12/100 x 3/12 is = 3/100 = 0.03

    which gives e^(0.03) = 1.03045

    (1.03045-0.9)/(1.1-0.9) = 0.13045/0.2 = 0.65225 i.e. 0.6523 to 4 decimal places


  • #3
    Eire-Dearg
    Registered Users, Registered Users 2 Posts: 8,900 ✭✭✭Eire-Dearg


    Ahhhhhh that makes much more sense now, I completely forgot about the e constant.

    Thanks for clearing that up!


  • #4
    bnt
    Registered Users, Registered Users 2 Posts: 13,076 ✭✭✭✭bnt


    Also, if you're doing it in a spreadsheet, it's the EXP() function i.e.

    =(EXP(0.12*3/12)-0.9)/(1.1-0.9)

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