Question

# An account pays 8.4% compounded continuously. What is the effective quarterly rate? Enter your answer as...

An account pays 8.4% compounded continuously. What is the effective quarterly rate? Enter your answer as a percentage without the % sign (e.g., enter 2.05% as 2.05). (Use formulas and Step-by-Step NOT excel)

Effective annual rate with continuous compounding  = ert = e8.4% -1 = 8.76%

Since effective rate with quarterly compounding and effective rate with continuous compounding rates are same

(1+Effective quarterly Rate)4-1 = 8.76%
Effective Quarterly Rate = (1+8.76%)1/4-1 = 2.12%

Please Discuss in case of Doubt

Best of Luck. God Bless

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