** Enter percentages as whole numbers, i.e. 5% should be input as 5. The calculator converts percentages to decimal form.
Continuous Compound Interest Formula
To solve a problem seeking continuous compound interest, the formula is:
A = Pert
A = Amount of future value
P = Initial amount invested
e = Stands for Napier's number and is approximately 2.7183
r = Interest rate
t = Length of time investment will accrue
Sample Continuous Compound Interest Problem
Alex has $7000 to invest in a bank savings account. The savings will accrue interest continuously at 5.7%, how much will he have after 7 years?
A = $7,000 * 2.7183 .057 * 7
He will have $10,432.33 after his money has continuously compounded over 7 years.
Keeping in mind this is a theoretical concept as money generally accrues interest monthly, quarterly, semi-annually, or annually... The value in continuous compounding interest is really conveyed when looking at how an investment grows over time. For example if you invest $10,000 in an S&P fund, which sees an average return of about 10% a year (when looking at the past 90 years) your money almost triples in 10 years with a value of ~$27,000, but if you let it sit for 30 years you will have just over $200,000!! This sharp increase over a fairly short period of time illustrates the power of exponential growth (of money). The growth is even more significant as you make contributions over time.