the daily compounding option offers a better return - why is that the case? What is the effective rate of that option? Solution The effective return depends on the frequency of compouding. we can get accelerated return with continuous compounding option. this compound daily. Effective rate of interest can be obtained by using an equation = e^r-1 where e = episilon=2.718 r = rate of interest.

1. the daily compounding option offers a better return - why is that the case? What is the effective
rate of that option?
Solution
The effective return depends on the frequency of compouding. we can get accelerated return with
continuous compounding option. this compound daily.
Effective rate of interest can be obtained by using an equation = e^r-1
where e = episilon=2.718
r = rate of interest