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Continuous Interest Formula

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Chesser Ai Answer

Continuous compounding yields A = P e^{rt}, with P principal, r rate, t time.

Key Concepts

  • Concept: Continuous compounding
  • Concept: Differential equation dA/dt = r A
  • Concept: Exponential growth function

Steps

  1. Action: Assume constant r; set dA/dt = r A
  2. Action: Solve with A(0) = P
  3. Action: Conclude A(t) = P e^{rt}

Formula

$$A(t) = P,e^{r t}$$

For a non-constant rate r(t):

$$A(t) = P,expleft(int_{0}^{t} r(s),dsright)$$

Example: P = 1000, r = 0.05, t = 5 → A ≈ 1000 e^{0.25} ≈ 1284.03.

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