Question 1186613: How much is 100,000 pesos worth in three years if deposited in a continuously compounded account with a nominal interest rate of 3%. Determine also its effective rate in one year period compounded; a) daily (on leap year), b)
monthly, c) bi-monthly d) quarterly (Note: Answer must be in percentage and in four decimal places.
Answer by Boreal(15235)   (Show Source):
You can put this solution on YOUR website! Pe^rt for continuously compounded so 100000*e^(0.03)*1=103,045.45 so 3.0454% effective rate Continuously compounded
a. 100000(1+(0.03/366))^366=103,045.32 so 3.0453%
b. 100000(1+(.03/12))^12=103041.6 or 3.0416%
c. 100000(1+(.03/6))^6, using the meaning here as every 2 months, =103037.75 or 3.0378%
d. 100000(1+(.03/4))^4=103,033.91 or 3.0339%
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