24.9. Continuous Compounding

Try these first

1. 1.

   What is the formula for calculating future value with continuous compounding?

   Hint

   Think about how often the interest is added.

2. 2.

   Define the term 'continuous compounding.'

   Hint

   Consider how this compares to regular compounding.

3. 3.

   What is the formula for continuous compounding?

   • FV = P × e^(rt)
   • FV = P(1 + r)^t
   • FV = P + rt

   Hint

   Look for the use of e in the expression.

4. 4.

   Continuous compounding results in more interest than annual compounding.

   • True
   • False

   Hint

   Consider how often the interest is added.

5. 5.

   An investor places ₹4,000 in a fund with a continuous compounding interest rate of 7% for 6 years. Calculate the future value.

   Hint

   Use the approximate value of 'e' for precise calculations.

6. 6.

   If an amount of ₹3,500 is invested at a continuous compounding rate of 3.5% for 8 years, what is the future value?

   Hint

   Calculate e raised to the power of your exponent first for accurate results.