COMPOUND INTEREST FORMULA
CONTINUOUSLY: PARTS TO CONSIDER MOST
The compound interest formula continuously is known to many as a more commonly used
type of compound interest formula in real life. The compounding happening nowadays is made
automatically through computers. Therefore, the compounding may happen by the minute or
even by the second. Since this is the case, one should really learn how the compound interest
formula continuously works. Before getting in an investment or loan, one should prepare not
only money-wise but also with knowledge regarding the computations and the processes done.
Companies or banks use automated machineries for computations and the compounding,
especially in loans, is done every minute. Being prepared will surely give you an advantage and
will help you have a better loan experience than most with the compound interest formula
Parts Of The Compound Interest Formula Continuously That We Should Take
In forming this innovative compound interest formula continuously, there is one part that gets all
the attention. It has then been known as a progress of exponent purposes. If you remember how
the compound interest formula continuously looks like, you will see a, exponential value there of
‘e’. This is known as the natural exponent. There are books regarding more information of the
exponent but in this article we will focus more on the formula itself and the process it is used for.
There is another part in the compound interest formula continuously that we should also pay
attention to.For students, this is the part where in more are getting a hard time with. This part of
the compound interest formula continuously that I am talking about is the variable ‘n’. The ‘n’ is
the substitute for the times that the interest gets compounded in a year. Using the continuous
formula, what do you think will be the result of your cash amount, especially when it just starts
compounding more and more by the minute or second? What do you think will happen if the
yearly compounding goes to quarterly compounding to every month and so on and so forth?
Let us see what will happen to the result of the compound interest formula continuously is
we will disregard the principal amount, and all other parts of the formula, and just focus on
how the compounding works:
Time/s of compounding Result of the compound interest formula
every minute 2.7182792154…
every second 2.71828247254…
As what is shown in the table, the results get larger as the number of compounding gets more
frequent. However, you may also notice that the progress of increase is not that much when the
time of compounding gets more often. There is almost a constant value of 2.71 in the latter parts.
If you are keen enough, you will be able to notice that it is almost becoming one of the parts of
the standard compound interest formula continuously which is the natural exponent known as
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