Determine the final value for Compound interest problems

The video tutorial explains the concept of continuous compounding interest using the PERT formula. It starts by introducing different compounding intervals and focuses on continuous compounding, which involves the mathematical constant E. The tutorial walks through the steps of calculating the future value of an investment using the PERT formula, emphasizing the importance of simplifying the exponent first. The example used involves a $5000 investment at an 8% annual interest rate over 15 years, resulting in a significant increase in value. The tutorial concludes by highlighting the ease of using a calculator for such computations.

What is the key mathematical constant introduced when compounding continuously?

• Planck's constant

• Golden ratio

• Euler's number (e)

• Pi

In the PERT formula, what does the 'P' stand for?

• Percentage

• Period

• Principal

• Profit

How is the interest rate represented in the PERT formula?

• As a whole number

• In decimal form

• As a fraction

• As a percentage

If you invest $5000 at an 8% annual interest rate compounded continuously for 15 years, approximately how much will you have?

• $10,000

• $20,000

• $16,658

• $25,000

What is the first step in simplifying the continuously compounded interest formula?

• Determine the time period

• Convert the interest rate to a percentage

• Simplify the exponent

• Calculate the principal