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deff fn [24]
3 years ago
6

Estimate the effective annual rate (ear) for a continuously compounded annual nominal rate of 8.00%.

Business
1 answer:
kirill115 [55]3 years ago
8 0
The effective annual rate is 8.33%.
we can calculate the effective nominal annual rate by using this formula;
r = e∧i - 1
e is the constant = 2.718
i = compounded annual nominal rate = 8% = 0.08
r = 2.718∧ (0.08) - 1 
= 1.0833 - 1
= 0.0833 = 0.0833 x 100 = 8.33%
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