Question

if interest rate at 100r% compounded annually is equivalent to interest at 100s% compounded m times in a year, show that r=[1+s/m]-1. Hence, deduce that r exceeds by an amount equal to (m-1/2m)s^2 when s is small.​

Answer 1

Answer:

Answer in explanation.

Step-by-step explanation:

Numerical Example: For 4-year investment of $20,000 earning 8.5% per year, with interest re-invested each month, the future value is

FV = PV(1 + r/m)mt = 20,000(1 + 0.085/12) (12)(4) $28,065.30.