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Answer: c) 6.939% and 7.186%
A 7.0% nominal rate compounded quarterly has effective annual rate: \[ (1+0.07/4)^4 - 1 = (1.0175)^4 - 1 \approx 0.07186 = 7.186\% \] The equivalent continuously compounded rate is: \[ r_c = \ln(1.07186) \approx 0.06939 = 6.939\% \] So the correct answer is **c) 6.939% and 7.186%**.
Author: Manit Arora
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A
a) 6.739% (continuous) and 7.486% (annual)
B
b) 6.829% and 7.366%
C
c) 6.939% and 7.186%
D
d) 7.139% and 6.886%
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