Continuous Compound Interest Problems
The Formula for Continuous Compound Interest is:
Where,
P = Principal amount (original amount)
r = Interest rate compounded continuously
t = Time in years
A = Amount at time t (final amount)
Example 1.
Suppose $1,500 is invested at a rate of 6% per year compounded continuously.
(a) How much will be the amount after 3 years?
(b) How much interest will be earned?
Solution:
(a) As we know that the Formula for Continuous Compound Interest is:
Here, P = 1500, r = 0.06 (6%), t = 3
(b) As we know that: A = P + I, So, I = A - P
I = 1795.8 - 1500
= $295.8