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.
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It only takes a minute to sign up.Sign up to join this community
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: