What Continuously Compounded Effective Rate of Interest Will Yield the Same

question 19

Multiple Choice

What continuously compounded effective rate of interest will yield the same present value of a future cash flow as an annual rate of interest of 6.15%?

• A) 5.97%
• B) 6.32%
• C) 4.11%
• D) 8.24%

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Definitions:

Required Reserve Ratio

The fraction of deposits that banks are required by law to keep on hand or with the central bank, rather than lend out.

Money-Creation Process

The mechanisms through which new money is produced and introduced into the economy, primarily conducted by central banks and commercial banks.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, bills, and notes.

Checkable Deposits

are bank account balances that can be readily accessed and used for payments or withdrawals via checks, debit cards, or electronic transfers.