Question

What effective interest rate per year is equal to 19% per year compounded continuously?

Select one:
a. 21.78
b. 15.55
c. 20.92
d. 16.18
e. 17.15

Answer 1

Explanation:

Effective Annual Rate Formula

i=(1+rm)m−1

Where r = R/100 and i = I/100; r and i are interest rates in decimal form. m is the number of compounding periods per year. The effective annual rate is the actual interest rate for a year.

With continuous compounding the effective annual rate calculator uses the formula:

i=er−1

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