Continuous Compounding

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

Formula from Continuous Compounding

FV = PV x e^rt

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 e^rt = 5000 x e^{0.05 x 3} = 5000 x e^0.15 = 5000 x 1.161834 = 5809.17