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Continuously Compounded Interest

Interest that is, hypothetically, computed and added to the balance of an account every instant. This is not actually possible, but continuous compounding is well-defined nevertheless as the upper bound of "regular" compound interest. The formula, given below, is sometimes called the shampoo formula (Pert®).

Note: This same formula can be used for exponential growth and exponential decay.


 

See also

Half-life, doubling time

 


  this page updated 28-jul-14
Mathwords: Terms and Formulas from Algebra I to Calculus
written, illustrated, and webmastered by Bruce Simmons
NCTM Web Bytes December 2004 Web Bytes March 2005 Web Bytes