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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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    Solution Preview

    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 Summary

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

    $2.19

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