Question

Hey guys, I have this question that confused me. I was hoping someone could help.

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"Does continuous compounding increase or decrease the amount of time needed to save $10,000 at 12% annual interest when compared to other compounding periods available? Explain your answer".
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Thank you

Answer 1

Let us calculate the effects of the same on regular compounding: 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. Another example can say a Savings Account pays 6% annual interest, compounded continuously.

Explanation: