ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Calculating the limit of this formula as n approaches infinity (per the definition of continuous compounding) results in the formula for continuously compounded interest: FV = PV x e (i x t), where e is the mathematical constant approximated as 2.7183.

Detailed explanation-2: -What Is e in Continuous Compounding Formula? ‘e’ in the continuous compounding formula is a mathematical constant and its value is approximately equal to 2.7183. We can use the button ‘e’ on the calculator for more accurate calculations instead of using the number 2.7183.

Detailed explanation-3: -Continuous Compounding Formula = P * erf where, P = Principal amount (Present Value) t = Time. r = Interest Rate.

Detailed explanation-4: -E is a series of numbers that begin with 2.71828. Just like pi, it is non-terminating, which means it goes on and on. It is also an irrational number, which means it can’t be expressed as a fraction. You can use it to calculate the decay or growth of a particular factor over time, such as compound interest.

Detailed explanation-5: -The use of e provides a shortcut for calculation of continuously compounding interest. The formula for continuous compounding is A = P e r t A = P e ^ rt A=Pert where A is the total amount at any time, P is the original principal, r is the rate of interest, and t is the time period.