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 =
e^{rt} = e^{8.4%} -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%
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