In Example 5.6.10, we considered the effect of continuous compounding of interest. Suppose that S0 dollars earn

Question:

In Example 5.6.10, we considered the effect of continuous of interest. Suppose that S0 dollars earn a rate of r per year compounded continuously for u years. Prove that the principal plus interest at the end of this time equals S0eru. Suppose that interest is compounded n times at intervals of u/n years each. At the end of each of the n intervals, the principal gets multiplied by 1+ ru/n. Take the limit of the result as n → ∞.
Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will...