Formula for continuously compounding interest
8:59
Khan AcademySal Khan
Formula for continuously compounding interest
Compound interest is when interest is added to the principal, so the interest also earns interest. Continuous compounding is a special case where interest is added an infinite number of times per year, making the growth smoother and faster. Learn how to use formulas to calculate compound interest and continuous compounding.
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SOLVED:Suppose that spot interest rates with continuous compounding are as follows: Maturity (years) Rate (% per annum) 1 12.0 2 13.0 3 13.7 4 14.2 5 14.5 Calculate forward interest rates for the second, third, fourth, and fifth years.
SOLVED:Suppose that spot interest rates with continuous compounding are as follows: Maturity (years) Rate (% per annum) 1 12.0 2 13.0 3 13.7 4 14.2 5 14.5 Calculate forward interest rates for the second, third, fourth, and fifth years.
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