Interest of Continuous Compounding
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I have 5,000 dollars in my savings account. If I choose to keep my money for five years in a savings account with a 2% interest rate or in a five year certificate of deposit with and interest rate of 4.5%.
Calculate how much interest you would earn with each option over five years time with continuous compounding.
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Solution Summary
The solution calculates interest earned with continuous compounding.
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With continuous compounding, the amount at the end of t years is
Amount = Principal x e ^ (rate of interest x time in years)
(^ stands for raised to the power of; e is ...
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