8006 Exam Dumps | A bank advertises its certificates of deposits as yielding a 5.2% annual effective rate. What is the

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Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition
PRMIA.8006.v2021-04-25.q101
Question 99

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Question 99/101

A bank advertises its certificates of deposits as yielding a 5.2% annual effective rate. What is the equivalent continuously compounded rate of return?

A. 4.82%

B. 5%

C. 5.07%

D. 5.20%

Correct Answer: C

Explanation
The equivalent continuously compounded rate in this case can be calculated as ln(1+5.2%) = 5.07%. The other answers are incorrect.
Refer to the tutorial on interest rates for more details on how continuously compounded rates work.

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