1. Find Future value FV = ?
Principal P = 1000, Interest Rate i = 10%, Time n = 5 Year,
for Contineous Compounding method
Solution:
`P=1000`
`i=10%=0.1` per year (Interest rate)
`n=5` years (Number of periods)
`FV=P*e^(i*n)`
`=1000*e^(0.1*5)`
`=1000*e^(0.5)`
`=1000*1.65`
`=1649`
| Year | Principal | Yearly Interest | Total Interest | Total Balance |
| 0 | 1000 | 0 | 0 | 1000 |
| 1 | 1000 | 105.17 | 105.17 | 1105.17 |
| 2 | 1000 | 116.23 | 221.4 | 1221.4 |
| 3 | 1000 | 128.46 | 349.86 | 1349.86 |
| 4 | 1000 | 141.97 | 491.82 | 1491.82 |
| 5 | 1000 | 156.9 | 648.72 | 1648.72 |
2. Find Future value FV = ?
Principal P = 5000, Interest Rate i = 10%, Time n = 3 Year,
for Contineous Compounding method
Solution:
`P=5000`
`i=10%=0.1` per year (Interest rate)
`n=3` years (Number of periods)
`FV=P*e^(i*n)`
`=5000*e^(0.1*3)`
`=5000*e^(0.3)`
`=5000*1.35`
`=6749`
| Year | Principal | Yearly Interest | Total Interest | Total Balance |
| 0 | 5000 | 0 | 0 | 5000 |
| 1 | 5000 | 525.85 | 525.85 | 5525.85 |
| 2 | 5000 | 581.16 | 1107.01 | 6107.01 |
| 3 | 5000 | 642.28 | 1749.29 | 6749.29 |
This material is intended as a summary. Use your textbook for detail explanation.
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