Hi there
Continuous compounding
1) A=1,000×e^(0.02×1)
=1,020.20134...larger value
Daily compounding
2) A=1,000×(1+0.02÷365)^(365×1)
=1,020.20078
Continuous compounding is larger
1,020.20134−1,020.20078
=0.00056
Reason
The effect of compound interest depends on frequency.Continuously compounded returns compound the most frequently of all because the interest with continuously compounded is computed every second while the interest with daily compounding is computed every day
Hope it helps
