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Continuous Compounding

Here's our continuous compounding formula:

A = Pe^( rt ) ... A is the final amount ... P is the principle ( initial amount ) ... r is the interest rate ... t is the time

Let's do an example:

If you invest $1,000,000 in an account paying 12% compounded continuously, how much will you have in the account after 20 years?

A = Pe^( rt )
 

A = 1000000e^( .12 ( 20 ) ) = approximately $11,023,176.38 ... the e is a button on your calculator ... Look over the ln button
 

Compare this to what you got at the end of the last lesson...  It should be a decent amount more.

YOUR TURN:

If you invest $25,000 at 7% compounded continuously, how much will you have in 10 years?