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AGAN’S GROUP
CONTINUOUS
COMPOUNDING
WHAT IS CONTINUOUS
COMPOUNDING ?
Continuous Compound Interest is a formula
for loan interest where the balance grows
continuously over time, instead of at set
times like monthly or yearly. It is the
highest level of compound interest or an
extreme case of compounding .
The formula for continuous
compounding is derived from the
formula for the future value of an
interest-bearing investment:
“e is a mathematical constant where e ≈ 2.7183.”
If the Future Value is If the Interest Rate is
unknown unknown
If the Present Value is If the Time is
unknown unknown
01
Tina invested $3000 in a bank that pays an
annual interest rate of 7% compounded
continuously. What is the amount she can
get after 5 years from the bank? Round your
answer to the nearest integer.
01
To find: The amount after 5 years.
The initial amount is P = $3000.
The interest rate is, r = 7% = 7/100 = 0.07
Time is, t = 5 years.
$4,257
02 What should be the rate of interest for
the amount of $5,300 to become
double in 8 years if the amount is
compounding continuously? Round
your answer to the nearest tenths.
To find: The rate of interest, r.
02
The initial amount is, P = $5,300.
The final amount is, A = 2(5300) = $10,600.
Time is, t = 8 years.
8.7%
03
Jim invested $5000 in a bank that pays an
annual interest rate of 9% compounded
continuously. What is the amount he can
get after 15 years from the bank? Round
your answer to the nearest integer.
03
To find: The amount after 15 years.
The initial amount is P = $5000.
The interest rate is, r = 9% = 9/100 = 0.09.
Time is, t = 15 years.
ANSWER?
03
To find: The amount after 15 years.
The initial amount is P = $5000.
The interest rate is, r = 9% = 9/100 = 0.09.
Time is, t = 15 years.
$19,287
Thank You
Very Much
