Question

Find the corresponding effective interest rate for 3% per year compounded continuously?

Answer 1

Answer:

3.045%.

Step-by-step explanation:

We are asked to find the corresponding effective interest rate for 3% per year compounded continuously.

We will use effective interest formula to solve our given problem.

$r=e^i-1$, where,

r = Effective interest rate,

e = Mathematical constant,

r = Interest rate in decimal form.

Let us convert given interest rate in decimal form.

$3\%=\frac{3}{100}=0.03$

Substitute values:

$r=e^{0.03}-1$

$r=1.030454533953517-1$

$r=0.030454533953517$

$r\approx 0.03045$

Convert into percentage:

$0.03045\times 100\%=3.045\%$

Therefore, the corresponding interest rate would be 3.045%.