@bibby. for $A(t)=P * e^{rt}$, r is the ANNUAL interest rate, so if they give a monthly interest rate, say 1% every 3 months, would I multiply it by 4 to find the annual interest rate? (this may be a dumb question)

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amistre64 · Answer

yes

amistre64 · Answer

but quite frankly, r is a continuous rate of change

bloomlocke367 · Answer

it says that r is interest rate (annual)

amistre64 · Answer

when doing the usual compound interest calculations

A = P(1+r/n)^(nt)

r is the APR, n is the number of times a year its applied, and t is the number of years

as n approaches infinity, we get a compounding rate that is always occuring, in infinite number of times a year

as n approaches infinity, (1+r/n)^(nt) is equated as e^(rt)

bloomlocke367 · Answer

the continuously compounded interest equation is $A(t)=P * e^{rt}$, well that's what my textbook says.

amistre64 · Answer

thats what i just said ... i just explained why it is that.

bloomlocke367 · Answer

ohhh okay XD that just kind of confused me.

bloomlocke367 · Answer

wait, I just read it like 3 more times so now I understand.

amistre64 · Answer

$$\lim_{n\to\infty}~P(1+\frac rn)^{nt}=Pe^{rt}$$

bloomlocke367 · Answer

Thank you.

amistre64 · Answer

your welcome