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Continuously Compounded Interest

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A Limit Involving e Numerically evaluate the following limit: x 101001000 10000 100000 1000000 10000000 f(x)f(x) 2.5942.7052.7172.718 2.71828 2.7183

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Compound Interest P = Principal Amount (original) r = decimal rate ( % ÷ 100 ) t = time in years n = number of intervals

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A Limit Involving Compound Interest Analytically evaluate the following limit: Rewrite the limit so it resembles the limit involving e. Let x = n/r. This limit represents interest that is compounded infinitely many times a year (continuous).

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Continuously Compounded Interest P = Principal Amount (original) r = decimal rate ( % ÷ 100 ) t = time in years

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7.2 Compound Interest and Exponential Growth ©2001 by R. Villar All Rights Reserved.

7.2 Compound Interest and Exponential Growth ©2001 by R. Villar All Rights Reserved.

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