Question

The effective annual interest rate on an account compounded continuously is 4.21%. Estimate the nominal interest rate

Answer 1

e^r = ( 1+.0421*1) , i believe

Answer 2

( 1 + r/n)^(n*t) is the compound interest formula

Answer 3

ok lets use
1 + r = ( 1 + i/n)^n, where i is the nominal rate, and r is effective rate

Answer 4

because the 1 + r is the total balance after 1 year, r is the effective interest

Answer 5

for a 1 dollar initial deposit

Answer 6

and the right side is the nominal interest rate (that which is being compounded )

Answer 7

so solve
1 + .0421 = e^r

Answer 8

sorry i messed up again

Answer 9

e^i = 1 + .0421

Answer 10

so the nominal rate is 4.12%

Answer 11

i = ln ( 1 + .0421 )

Answer 12

i = .04123