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Why is there 1/6? Problem 4.29. An interest rate is quoted as 5% per anmum with semianmual compounding. What is the equivalent rate with (a)
Why is there 1/6?
Problem 4.29. An interest rate is quoted as 5% per anmum with semianmual compounding. What is the equivalent rate with (a) anmual compounding, (b) monthly compounding, and (c) contimuous compounding. a) With annual compounding the rate is 1.02521=0.050625 or 5.0625% b) With monthly compounding the rate is 12(1.0251/61)=0.04949 or 4.949%. c) With continuous compounding the rate is 2ln1.025=0.04939 or 4.939% Step by Step Solution
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