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The $500,000 Question Given the initial information P0, r and n, Banks will sometimes provide an additional percentage rate called the effective yield. This is understood to be an annual interest rate s% which would yield the same amount at the end of one year under one compounding as the given data under n compoundings. (a) If P0 dollars is invested at an annual rate of 7% compounded quarterly, what is the effective yield? (b) If P0 dollars is invested at a rate of 6.75% continuously compounded, what is the effective yield? Phone A Friend
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