Katharina Lewellen invested $1,000 at a continuously compounded rate of 10 percent for one year. What is the value of her wealth at the end of one year? From Equation 4.9 we have:

This number can easily be read from Table A.5. We merely set r, the value on the horizontal dimension, to 10 percent and t, the value on the vertical dimension, to 1. For this problem the relevant portion of the table is shown here:

Note that a continuously compounded rate of 10 percent is equivalent to an annually compounded rate of 10.52 percent. In other words, Katharina would not care whether her bank quoted a continuously compounded rate of 10 percent or a 10.52 percent rate, compounded annually.

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$1,000 x e¹10 = $1,000 x 1.1052 = $1,105.17