Continuous Compounding

The most that one can return on their investment through compound interest comes through Financial Theory that brings about the concept of continuous compounding. The concept states that, as compounding periods get smaller and smaller, the value of n (the number of compounding events) has no limit.

And remember, if the movie Mean Girls taught us anything, it’s this: “If the limit never approaches anything…the limit does not exist. The limit does not exist!”

The idea of continuous compounding shifts the limit of n to infinity, giving us the maximum theoretical return if money is invested and reinvested across an infinite number of periods. Just know you’ll never actually receive this return on investment from any bank or financial institution in the world.