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43
An interest rate is 5% per annum with continuous compounding. What is the equivalent rate with semiannual compounding?
A.5.06%
B.5.03%
C.4.97%
D.4.94%
A.5.06%
B.5.03%
C.4.97%
D.4.94%
Answer: A
The equivalent rate with semiannual compounding is 2×(e0.05/2−1) = 0.0506 or 5.06%.
m(eRc/m -1) =Rm
The equivalent rate with semiannual compounding is 2×(e0.05/2−1) = 0.0506 or 5.06%.
m(eRc/m -1) =Rm
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015