Loading the player...
What is 'Continuous Compounding'
Continuous compounding is the process of earning interest on top of interest. The interest is earned constantly, and immediately begins earning interest on itself.
Next Up
BREAKING DOWN 'Continuous Compounding'
This is an extreme case of compounding, most interest is compounded on a monthly, quarterly, or semiannual basis.
RELATED TERMS

Compound Interest
Compound Interest is interest calculated on the initial principal ... 
Compounding
The ability of an asset to generate earnings, which are then ... 
Compound
The ability of an asset to generate earnings, which are then ... 
Effective Annual Interest Rate
Effective Annual Interest Rate is an investment's annual rate ... 
Biotech Compound
A chemical entity that forms the starting point in the drug development ... 
Stated Annual Interest Rate
The return on an investment that is expressed as a peryear percentage, ...
Related Articles

Bonds & Fixed Income
Accelerating Returns With Continuous Compounding
Investopedia explains the natural log and exponential functions used to calculate this value. 
Investing
How does Compound Interest Work?
A quick way to understand the impact of compound interest is to ask yourself if you’d rather receive $100,000 a day for a month, or start with a penny on day one and double it every day for those ... 
Savings
How Interest Rates Work on Savings Accounts
Here's what you need to know to grow your rainyday fund. 
Savings
The Difference Between Compounding Interest and Simple Interest
Interest is the cost a borrower pays to use someone else’s money. Interest can be either simple or compounded. 
Economics
Explaining Interest
Interest is the price charged to borrow money, and is typically expressed as a percentage of the principal, or the amount loaned. 
Investing
The Effective Annual Interest Rate
The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding. 
Personal Finance
Dissecting the Simple Interest Formula
Simple interest ignores the effect of compounding: it's only calculated on the principal amount. This makes it easier to calculate than compound interest. 
Personal Finance
4 Ways Simple Interest Is Used In Real Life
Simple interest works in your favor when you're a borrower, but against you when you're an investor. 
Mutual Funds & ETFs
5 Best Ways to Earn Interest
Learn how to use tools to increase your interest earnings. Use compounding interest and breakpoints to increase your interest income. 
Personal Finance
Simple Interest Loans: Do They Exist?
Yes, they do. Here is what they are – and how to use them to your advantage.
RELATED FAQS

How often is interest compounded?
Understand what compound interest is and how the compounding of interest applies to the benefit of investors or creditors, ... Read Answer >> 
Other than my savings account, what other types of holdings compound my interest?
Understand the benefits of compounding interest, and learn the types of investments that offer compounding in addition to ... Read Answer >> 
What is continuously compounding interest?
Read a quick explanation of continuously compounding interest rates, why compounding matters and how to calculate the continuous ... Read Answer >> 
How can I tell if a loan uses simple or compound interest?
Learn the differences between simple and compound interest and how you can use mathematical calculations and lender disclosures ... Read Answer >> 
How is compound interest taxed?
Understand the concept of compound interest as opposed to simple interest and learn the usual tax rate at which compound ... Read Answer >> 
What is the difference between compounding interest and simple interest?
Learn about simple interest and compound interest, how to calculate the two types of interest and the main difference between ... Read Answer >>