Solution 23990: Calculating Continuous Compounding Interest Using a BA II PLUS™ Family Calculator.
How do I calculate continuous compounding interest using the BA II PLUS family calculator?
To calculate continuous compounding interest using the BA II PLUS family calculator, please refer to the example and follow the steps listed below.
For example: A customer invests $10,000 in a CD for 2 years with an 8% interest rate that compounds continously. What is the future value of the CD?
1) Press [2nd] [CLR TVM] to clear out any previous TVM entries.
2) Press [2nd] [P/Y], input 1, then press [ENTER].
3) Press the [down arrow] key, input 1,000,000,000, then press [ENTER].
Please Note: Inputting a very large value for the number of compounds per year (C/Y) is an approximation of infinity, resulting in continuous compounding.
4) Press [2nd] [QUIT] to return to the home screen.
5) Input 2, then press [N].
6) Input 8, then press [I/Y].
7) Input 10,000, then press [+|-] [PV].
8) Press [CPT] [FV].
The calculator should display $11,735.11, which is the future value of the CD with continuous compounding.
Please see the BA II PLUS or BA II PLUS PROFESSIONAL guidebooks for additional information.