Principal and Interest Continuous Compounding Imagine dividing the year into infinitely small periods and use m lim where e 2.7818...is the base of the natural logarithm.The effective interest rate is the number r'that satisfies 1+r/=e. Continuous Compounding Interest rate (% Nominal 1005001000200030005000750010000 Effective 10151310522214349964871117017183 Xi CHEN (chenxi01090bfsu.edu.cn) Investment Science 11/174Principal and Interest Continuous Compounding Imagine dividing the year into infinitely small periods and use lim m→∞  1 + r m m = e r , where e = 2.7818... is the base of the natural logarithm. The effective interest rate is the number r 0 that satisfies 1 + r 0 = e r . Xi CHEN (chenxi0109@bfsu.edu.cn) Investment Science 11 / 174