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Further the formula for continuous compounding is slightly different that requires initial amount interest rate and tenure.
Continuous compounding excel math. Fv 1 000 e 0 08 1 000 1 08328 1 083 29. As can be observed from the above example the interest earned from continuous compounding is 83 28 which is only 0 28 more than monthly compounding. Where p principal amount present value of the amount t time time is years r rate of interest. Compound interest is the eighth wonder of the world.
Wanted to have an excel function to do it for you. The continuous compounding formula calculates the interest earned which is continuously compounded for an infinite time period. This post by contributor andy shuler reveals the continuous compound interest formula and how a function built into excel will calculate it for you. Mathematically it is represented as a p er t examples of compounding formula with excel template.
Compound interest is the addition of interest to the principal sum of a loan or deposit or we can say interest on interest. The above calculation assumes constant compounding interest over an infinite time period. Another example can say a savings account pays 6 annual interest compounded continuously.
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