Best Answer

2

Q: What is the continuous compounding rate equivalent to an effective interest rate of 18 percent?

Write your answer...

Submit

Still have questions?

Continue Learning about Other Math

Continuous compounding is the process of calculating interest and adding it to existing principal and interest at infinitely short time intervals. When interest is added to the principal, compound interest arise.

Annual equivalent percentage rate.

You would use a compounding interest calculator in order to determine how quickly a certain amount of money will grow due to compounding interest. It is useful for determining how much to save and invest over several years.

150,000 per year (simple interest, no compounding)

Simple interest (compounded once) Initial amount(1+interest rate) Compound Interest Initial amount(1+interest rate/number of times compounding)^number of times compounding per yr

Related questions

Continuous compounding is the process of calculating interest and adding it to existing principal and interest at infinitely short time intervals. When interest is added to the principal, compound interest arise.

The "13 percent rate" is the equivalent annual rate. So the interest will be 130.

I think most banks use daily compounding, but you could use the continuous compounding to approximate daily compounding and be off by less than 0.2%

I think most banks use daily compounding, but you could use the continuous compounding to approximate daily compounding and be off by less than 0.2%

Nine years at 8%

Interest paid on interest previously received is the best definition of compounding interest.

An effective annual interest rate considers compounding. When the principle is compounded multiple times each year the interest rate increased to be more than the stated interest rate. The increased interest rate is the effective annual interest rate.

The new interest rate due to the impact of the total fees is 13.233 % which translates into an effective interest rate of 13.6708 % due to semi-annual compounding.

Interest paid on interest previously received is the best definition of compounding interest.

An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: Consider a stated annual rate of 10%. Compounded yearly, this rate will turn $1000 into $1100. However, if compounding occurs monthly, $1000 would grow to $1104.70 by the end of the year, rendering an effective annual interest rate of 10.47%. Basically the effective annual rate is the annual rate of interest that accounts for the effect of compounding.

The answer, assuming compounding once per year and using generic monetary units (MUs), is MU123. In the first year, MU1,200 earning 5% generates MU60 of interest. The MU60 earned the first year is added to the original MU1,200, allowing us to earn interest on MU1,260 in the second year. MU1,260 earning 5% generates MU63. So, MU60 + MU63 is equal to MU123. The answers will be different assuming different compounding periods as follows: Compounding Period Two Years of Interest No compounding MU120.00 Yearly compounding MU123.00 Six-month compounding MU124.58 Quarterly compounding MU125.38 Monthly compounding MU125.93 Daily compounding MU126.20 Continuous compounding MU126.21

Nominal interest rate is also defined as a stated interest rate. This interest works according to the simple interest and does not take into account the compounding periods. Effective interest rate is the one which caters the compounding periods during a payment plan. It is used to compare the annual interest between loans with different compounding periods like week, month, year etc. In general stated or nominal interest rate is less than the effective one. And the later depicts the true picture of financial payments.