Question

In: Finance

Consider a $100 investment paying 3.5% compounded daily, what is the equivalent quarterly rate ? 0.8750%...

Consider a $100 investment paying 3.5% compounded daily, what is the equivalent quarterly rate ?

0.8750%
0.8776%
0.0095%
none of the above
0.8788%

Solutions

Expert Solution

Considering a 360 day year, daily interest rate would be = 3.5/360 = 0.009722%

To find quarterly rate

Quarterly rate will be, daily rate compounded 90 times ( since 90 days are there in a quarter)

Quarterly rate = (1+ 0.00009722)^90 - 1

= 1.0087879641 - 1

=0.008788

=0.8788%


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