Continuous compounding is the procedure of obtaining interest on top of interest in a monthly, quarterly and semiannual basis. It is utilized to discover the future value of a present sum when investment is exacerbated persistently.

Calculator from Continuous Compounding

Currency =
Present value (PV) =
Interest rate = %
Number of years =
 
Future value (FV) =

Formula from Continuous Compounding

FV = PV x ert

Where,

  • FV = Future value
  • PV = Present value
  • r = Interest rate
  • t = Number of years

Example from Continuous Compounding

An amount of $5000.00 is deposited in a bank paying an annual interest rate of 5%, compounded continuously. Find the future value after 3 years.

Given,

PV = 5000 r = 5% = 0.05 t = 3

To Find,

Future value

Solution:

Substitute the given values in the formula, FV = PV x ert = 5000 x e0.05 x 3 = 5000 x e0.15 = 5000 x 1.161834 = 5809.17

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