With Continuous Compounding, Why Is the Effective Rate Higher Than

question 5

Essay

With continuous compounding, why is the effective rate higher than the nominal rate?

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Definitions:

Intervals

Ranges or spans of values within which a variable or an observation can lie, often used in the context of measurement scales or confidence estimates.

Overlap

The extent to which two or more groups or distributions share common elements or regions.

Frequency Distribution

A summary of how often different values occur within a dataset, often represented in a table or graph.

Interval Data

Interval data is a type of quantitative data where the intervals between values are meaningful, but there is no true zero point, allowing for the measurement of differences but not relative sizes or ratios.