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3 cards from this section. Quick, good the night before a test.
What is the formula for calculating future value with continuous compounding?
Think about how often the interest is added.
Define the term 'continuous compounding.'
Consider how this compares to regular compounding.
What is the formula for continuous compounding?
Look for the use of e in the expression.
Continuous compounding results in more interest than annual compounding.
Consider how often the interest is added.
An investor places ₹4,000 in a fund with a continuous compounding interest rate of 7% for 6 years. Calculate the future value.
Use the approximate value of 'e' for precise calculations.
If an amount of ₹3,500 is invested at a continuous compounding rate of 3.5% for 8 years, what is the future value?
Calculate e raised to the power of your exponent first for accurate results.
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