How to Calculate Continuous Compounding Future Value - Tutorial

How to Calculate Continuous Compounding Future Value - Tutorial, Definition, Formula Example

Definition:

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.

Formula:

FV = PV x ert
Where,
FV = Future value PV = Present value r = Interest rate t = number of years

Example :

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


english Calculators and Converters

Ask a Question


Sitemap