 Financial Terms Continuous compounding

# Definition of Continuous compounding ## Continuous compounding

The process of accumulating the time value of money forward in time on a
continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that
accrues immediately begins earning interest on itself.

## Continuous Compounding

The process of continuously adding interest to a principal plus
interest amount and calculating the resulting compound amount

# Related Terms:

## Compounding

The process of accumulating the time value of money forward in time. For example, interest
earned in one period earns additional interest during each subsequent time period.

## Compounding frequency

The number of compounding periods in a year. For example, quarterly
compounding has a compounding frequency of 4.

## Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

## Continuous random variable

A random value that can take any fractional value within specified ranges, as
contrasted with a discrete variable.

## Discrete compounding

compounding the time value of money for discrete time intervals.

## Continuous Discounting

The process of calculating the present value of a stream of future
cash flows by discounting over a continuous period of time ## Discrete Compounding

The process of adding interest to a principal plus interest amount
and calculating the resulting compound amount at specific
intervals, such as monthly or annually

## compounding period

the time between each interest computation

## continuous budgeting

a process in which there is a rolling
twelve-month budget; a new budget month (twelve months
into the future) is added as each current month expires

## continuous improvement

an ongoing process of enhancing employee task performance, level of product quality, and level of company service through eliminating nonvalue-added activities to reduce lead time, making products
(performing services) with zero defects, reducing
product costs on an ongoing basis, and simplifying products
and processes

## continuous loss

any reduction in units that occurs uniformly
throughout a production process

## compounding

When an asset generates earnings that are then reinvested and generate their own earnings.