Compound Interest Formula Continuously:
Concepts To Learn
To understand the whole compound interest formula continuously, we must the future value
of it. The future value of the compound interest formula continuously is also the outcome of a
certain savings or debt. It is answered through
the knowledge of the right compound interest
formula. In this time, we need to learn all the
entities of the said formula in using it in a
beneficial way in either saving more or
repaying a debt off. It is a good thing to learn
especially nowadays banks tend to compound
more than the usual monthly compounding.
Today, there are even banks which compound
daily for better interests.
But first, what comprises the compound interest
formula continuously in getting its future value?
The compound interest formula continuously is:
FV = PV * ert wherein:
FV is our outcome or the future value of a continuous compounding of interest.
PV is the present value or the current value of a loan or savings.
e is a constant with the value of approximately 2.7183. It is also known as the Napier’s number
or the base of the natural logarithm.
r is the rate of interest.
t is the time period in which the time of loan or savings ends or just simply the amount of time
wherein we want to know what the outcome will be.
The future value, of the compound interest formula continuously, is used to know the value of
a certain cash amount that you will have after a period of time with given conditions. In order
for one to know it, the use of compound interest formula continuously is a must. To use such
formula and get the right answer, one must know all the entities it has. There are three of them
in the compound interest formula continuously. It is the value of money over time, future cash
value, and continuous compounding of interest.
1. The value of money over time is the first thing we should know before using the compound
interest formula continuously. The outcome of debt or savings is greatly affected by this entity
of the compound interest formula continuously. To make this entity clear, it is the concept of
how your money is worth today and how will it worth over time. Our time is always changing,
therefore, the worth of your money today may be lesser or larger after a certain amount of
2. The second entity you need to learn before using the compound interest formula continuously is
the future cash value. As, what I mentioned in the above statement, the value of cash may d iffer
after sometime. A good example for this is a hundred dollars, after a year you can have a
hundred dollar and fifty. Is the additional fifty dollars, worth it after a year waiting? Knowing the
concept of compound interest, it is a safe and legal way to gain money. However, more people
are willing to risk more for a higher profit. Therefore, the choice is yours. Through using the
compound interest formula continuously, you shall know the outcome of your savings. This will
help you analyze and plan what you will do with your money before making a mindless decision.
3. The last entity you need to know before using the compound interest formula continuously is
the continuous compounding of interest. It is the continuous manner wherein the interest
compounds or accrues. It is not the same as the monthly or yearly compounding because it has
an infinite amount of interest compounding. Therefore, one shall truly gain if you are saving and
the compounding of interest is in this manner. However, this is not a good concept if you are in
Know All These Concepts To Have A Better Use Of The Compound Interest Formula
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