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2. Simple interest A simple interest rate of r for T years means a 100 investment becomes 100(1 + T) at maturity T. (In other
2. Simple interest A simple interest rate of r for T years means a 100 investment becomes 100(1 + T) at maturity T. (In other words, there is no compounding.) a) For simple interest of 5% for ten years, calculate the equivalent interest rate with (i) annual, (ii) quarterly and iii) continuous compounding. Assume 30/360 daycount. (b) Show that if simple interest of r for T years is equivalent to r" interest rate with annual compounding, then r* 0 as T 00
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