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Convert a 10% continuously compounded annual rate (rcc annual)into an effective annual rate (reff annual)....

Convert a 10% continuously compounded annual rate (rcc annual) into an effective annual rate (reff annual). The equivalent effective annual rate is: (a) 230.258509% pa (b) 10.536052% pa (c) 10.517092% pa (d) 10.468982% pa (e) 9.531018% pa

Solutions

Expert Solution

Correct Answer is Option E
Enter the keys in financial calculator -
Enter 1.1
then press button Ln
=0.9531018
EAY =9.531018%

or to cross verify
if EAY = 9.531018 then continuosly compounding is
i = e^r - 1
i = 2.271828 ^ 0.09531018
i = 0.1
I =10% continuously compounding

jeff jeffy answered 2 years ago
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