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A bank quotes you a one year interest rate of 4 % and a two year interest rate of 3 . 5 % per annum

A bank quotes you a one year interest rate of

4 %

and a two year interest rate of

3.5 %

per annum with quarterly compounding. What are the equivalent rates with:

.

Continuous compounding?

.

Annual compounding?

iii. What is the continuously compounded interest rate for one year starting in one year?

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