Find the Effective Annual Interest Rate of 4% Compounded Monthly

question 12

Short Answer

Find the effective annual interest rate of 4% compounded monthly. Round your answer to the nearest 0.01%.
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r_eff = __________ %

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Definitions:

Deltas

In options trading, deltas measure the rate of change of the option's price relative to a one-unit change in the price of the underlying asset, indicating how the price of the option is expected to move.

Portfolio Hedge Ratios

Ratios used to determine the appropriate amount of hedging needed to minimize risk in an investment portfolio, often through derivatives like options or futures.

Dynamic Hedging

A strategy that involves periodically adjusting the quantities of instruments used in a portfolio to hedge against risk as market conditions change.

Out-of-the-money

A term used in options trading to describe an option that has no intrinsic value. A call option is out-of-the-money if the stock price is below the strike price, and a put option is out-of-the-money if the stock price is above the strike price.