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### 157.2. A bank quotes an interest rate of 7.0% per annum with quarterly compounding. What is the equivalent rate with, respectively, continuous compounding and annual compounding? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

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%.

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157.2. A bank quotes an interest rate of 7.0% per annum with quarterly compounding. What is the equivalent rate with, respectively, continuous compounding and annual compounding?

157.2. A bank quotes an interest rate of 7.0% per annum with quarterly compounding. What is the equivalent rate with, respectively, continuous compounding and annual compounding?

Comments (0)