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Continuously Compounded Interest

Provided by Khan Academy

Simple interest means you earn a rate of interest on the principal, when the principal does not change. Compound interest increases interest periodically. Continuously compounded interest is an extreme case where the compounding frequency approaches infinity.

The following tutorial will tell you how compounding 100% annual interest continuously over a year converges to E. 

Next, learn to calculate the final payment of continuously compounding principal at an annual interest rate for a year.

Finally, we will demonstrate you what happens when continuous compounding occurs for multiple years.

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