← Chapter 11
College Algebra · Chapter 11

Compounding Toward e

A bank offers 100% interest on $1 for one year. Take it once and you have $2. Take it in smaller, more frequent slices and you do better — but not forever. Slide the number of payments up and watch the answer stop dead on a very famous number.

What $1 grows to, as the payments get more frequent

How many decimal places are right?

2.718281828459045…  = e
Compounding periodsslide to add payments
Payments per year1
Periods n1
Rate each100%
$1 becomes$2.00

Why it settles down instead of running away