Compounding Continuously

• September 28th 2009, 10:28 AM
Compounding Continuously
What annual rate compounded continuously is equivalent to a nominal rate of 6% compounded semiannually?

This is what I tried doing:

$e^{r}-1=e^{0.06}-1$

But i'm guessing that since it's semiannually 0.06 should be divided by 2?

Let me know if i'm on the right track

Thanks!
• September 28th 2009, 12:38 PM
LochWulf
Earning a nominal 6% compounded semi-ann gives you $1.03^2$ at the end of a year, for each dollar invested at the beginning of such year.

So you want to solve for r, where

$e^r \ =\ 1.03^2$

Hope that helped a li'l bit, li'l cookie.;)
• September 28th 2009, 08:57 PM