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Continuously Compounding Interest with Functions

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I am in Pre-Calc and we are covering the number e and the function e^x. I do not understand how to compound continuously. Please explain how to do this. Here is my problem: Suppose you invest $1.00 at 6% annual interest. Calculate the amount that you would have after one year if the interest is compounded continuously.

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Continuously Compounding Interest is investigated. The solution is well explained.

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To understand the concept of continuous compound, let us start from scratch.
rate of interest = r% per annum
Principal = P
Time = t years

Interest is compounded annually:
Amount
A = P*(1+r/100)^t

If interest is compounded half yearly,
A = ...

Solution provided by:
Amrit Lal Ahuja, PhD (IP)
Education
  • BEng, Allahabad University, India
  • MSc , Pune University, India
  • PhD (IP), Pune University, India
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