Answer to Question #196931 in Financial Math for Beauty Magadlela

Question

The effective rate for a continuous compounding rate of 17,5% per year, is

[1] 16,13%.

[2] 21,08%.

[3] 17,50%.

[4] 19,13%.

[5] 19,12%.

Answer 1

An effective rate is the rate at which the amount has increased during the period.

The computation of the effective rate is as follows:

Hence, the effective rate is 19.12%.