Question

what is compounded continuously mean

Answer 1

Instead of being compounded yearly, it is as though it were compounded every
second or even shorter. Amount A and Principal P

A = P exp (kt)

is the equation for continuous compounding at rate k per time over time t.

If k = 10% per year = 0.1/yr

then after two years A/P = exp(0.2) = 1.221

if it were compounded annually, A/P = (1+.10)^2 = 1.21, a little less.