What Is the Difference Between Daily and Monthly Compounding for a Nominal

question 15

Multiple Choice

What is the difference between daily and monthly compounding for a nominal interest rate of 7% per annum?

• A)0.06%
• B)0.04%
• C)0.02%
• D)0.01%

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Definitions:

Benchmark Error

A discrepancy between the performance of a benchmark index and the target performance of a fund or investment strategy it is supposed to represent.

Market Proxy

A representative asset or a portfolio that is considered to represent the characteristics of a particular market segment, often used in academic studies and financial analyses.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Regression Equation

An equation used in statistics to describe the relationship between a dependent variable and one or more independent variables.