Continuous Interest Formula

Continuous Interest Formula

What is Continuous Interest?

​In the previous lesson, we learned about Compound Interest, which is calculated on a daily, weekly, monthly, quarterly, semi-annually, or annual basis.

In this lesson, we will learn about the formula used when we compound continuously.

The continuous compounding formula should be used when they mention specifically that the amount is "compounded continuously" in a problem.

What is Continuous Interest?

What is Continuous Interest?

Example:

Multiple Choice

• $8,807.67

• $8,785.31

• $8,000.23

Multiple Choice

• $4,807.67

• $4,299.30

• $4,000.23

Fill in the Blanks

Round to the nearest hundredth (2 decimal places).

Fill in the Blanks

Round to the nearest hundredth (2 decimal places).

Fill in the Blanks

Round to the nearest hundredth (2 decimal places).

Fill in the Blanks

Round to the nearest hundredth (2 decimal places).

Fill in the Blanks

Round to the nearest hundredth (2 decimal places).

Fill in the Blanks

You want to buy a car in 6 years. You found a savings bank that has an interest rate of 6.5% compounded continuously.

How much should you need to invest now if you want the account to reach $30,000 in 6 years?

HINT: you're solving for P

Fill in the Blanks

You want to save $1,100 for a vacation you plan to take in 10 years.

How much money should you invest at 9% interest compounded continuously?

Fill in the Blanks

You want to save $2,000 for a plane ticket to Europe you plan to take in 1 year.

How much money should you invest at 2.5% interest compounded continuously?

Fill in the Blanks

HINT: this is NOT compounded continuously, so

you should be using the compounded interest formula

Fill in the Blanks

HINT: this is NOT compounded continuously, so

you should be using the compounded interest formula