SOLUTION: . Determine the effective interest rate (APR) if the nominal rate is 7% compounded continuously
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Question 1072609: . Determine the effective interest rate (APR) if the nominal rate is 7% compounded continuously
Answer by jorel1380(3719) (Show Source): You can put this solution on YOUR website!
The formula for continuous compounding is :future value=Principal x e^(yearly rate). So for 7%, we get: e^.07=1.072508181254. So:
FV=P x 1.07250818254
FV/P=1.07250818254
1.07250818254-1=.07250818254, or an effective interest rate of 7.250818254%. ☺☺☺☺
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