Continuous Compounding
Continuous compounding uses Euler's number, $e=2.71828$, when interest is compounded at every instant.
$$F=Pe^{rn}$$
$$i_{eff}=e^r-1$$
Continuous compounding uses Euler's number, $e=2.71828$, when interest is compounded at every instant.
A savings bank offers long-term savings certificates at 7.5% per year, compounded continuously. If a 10-year certificate costs $1000, what will be its value at maturity?
Final answer: $2,117.
What is the effective annual interest rate if the nominal rate is 14% compounded continuously?
Final answer: $15.03\%$.
If money is invested at a nominal rate of 8% for 4 years, what is the compound amount factor if compounded continuously?
Final answer: $1.377$.
Compute the interest on P200,000 for 8 years at 16% compounded continuously.
Final answer: P519,328.