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I am preparing for F< exam but I am unable to understand the meaning of continuously payable annuity.

What does it mean? An example would be great.

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in the context of bonds / fixed income an annuity is a payment which is made at regular time intervals - a cupon. A continuous one is simply being paid for an unlimited amount of time.

PV = Cupon/ (1+r)^1 + ...... Cupon/ (1+r)^t 

just to add to Bob's comment above, a "continuously compounding" annuity is re-invested at the same rate every month on top of your principal value and previous annuity payments - gaining interest on interest. the formula is this:

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  • $\begingroup$ Thanks for your answer. It really helped me to understand this. $\endgroup$ – RajSharma Jan 28 '16 at 13:55

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