Answer: -6.7%.

**Explanation** To find the continuously compounded rate of return that generates a one-year holding period return (HPR) of -6.5%, we use the formula for continuously compounded returns: \[ r_{cc} = \ln(1 + HPR) \] Where: - \( r_{cc} \) = continuously compounded rate of return - HPR = holding period return = -6.5% = -0.065 Substituting the values: \[ r_{cc} = \ln(1 + (-0.065)) = \ln(1 - 0.065) = \ln(0.935) \] Calculating \( \ln(0.935) \): \[ \ln(0.935) \approx -0.0672 \] Converting to percentage: \[ -0.0672 \times 100 = -6.72\% \] Among the given options: - A) -5.7% is too high - B) -6.3% is close but not exact - C) -6.7% is the closest to -6.72% Therefore, the continuously compounded rate of return is closest to -6.7%.

Author: LeetQuiz Editorial Team