A bank quotes you an interest rate of 12% per annum with monthly compounding. What is the equivalent rate with continuous compounding?
12.22% |
||
11.94% |
||
11.85% |
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12.12% |
EAR = (1+APR/n)^n - 1
n = number of compounds
=>
EAR = (1+12%/12)^12 - 1
= 0.12682503013
=>
e^i - 1 = 0.12682503013
=>
equivalent rate = 11.94%
A bank quotes you an interest rate of 12% per annum with monthly compounding. What is...
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