Like what you saw?
Create FREE Account and:
Compound Interest (Continuously) - Problem 1
So when interest is compounded continuously, what it means is that it's compounded the minute it finish calculating your interest it's going to recalculate. We are going to look at a problem.
So for this problem what we have is we invest $3000 at 4% compounded continuously and we're asked how much we have after 4 years?
So we know that it's compounded continuously which tells us we're going to be using our Pert equation a equals Pe to the rt. You invest 3000 which is our initial investment, which is our principal p, that goes the 3000 is the 2 point 7. Rate is our percent that we're dealing with, so that's going to be .04 and our time is 4 as well, so times 4.
So the amount that we are going to have after 4 years is just this expression, you can either leave it as an expression or you can either plug in your calculator, plug in our calculator 3000 e to the .04 times 4 we end up with $3520.53.
So using our Pert equation to figure how much money we have after investing a certain amount we compounded continuously.