This preview shows page 1. Sign up to view the full content.
Unformatted text preview: re value when interest is compounded continuously. 158 PART 2 Input
0.16 Important Financial Concepts Function
ex 1.1735 Next multiply this value by $100 to get the future value of $117.35 as shown at the
left. (Note: On some calculators, you may not have to press 2nd before pressing ex.)
Spreadsheet Use The future value of the single amount with continuous compounding also can be calculated as shown on the following Excel spreadsheet. 100
117.35 The future value with continuous compounding therefore equals $117.35. As
expected, the continuously compounded value is larger than the future value of
interest compounded semiannually ($116.99) or quarterly ($117.16). Continuous compounding offers the largest amount that would result from compounding
interest more frequently than annually. Nominal and Effective Annual Rates of Interest nominal (stated) annual rate
Contractual annual rate of
interest charged by a lender or
promised by a borrower.
effective (true) annual rate (EAR)
View Full Document