To solve a continuous compounding problem complete these steps:
Compute the annual effective rate using the above equation.
2. Either use this effective rate in your calculations with an annual period (P/YR = 1) or
convert this rate so that it applies to your payment period. In the following example,
P/YR = 12 so you have to calculate a new NOM% using the interest rate conversion
application with P/YR equal to 12.
You currently have 4,572.80 in an account at Dream World Investments that earns 18%
annual interest compounded continuously. At the end of each month, you deposit 250.00 in
the account. What will the balance be after 15 years?
Table 13-6 Calculating the annual nominal rate
Set to End Mode. Press
Table 13-7 Calculating the balance amount after 15 years
if BEGIN annunciator is displayed.
Divides nominal rate by 100.
Raises e to 0.18 power.
Calculates annual effective rate.
Stores effective rate.
Sets payments per year.
Calculates the annual nominal
rate for a monthly payment
Stores number of months.
Stores regular payment.
Stores current balance as a
negative value (like an initial
Calculates the account balance
after 15 years of payments with
18% interest compounded