Question 21.62

32. Suppose that you have a bank account with a balance of $4532.10 at the beginning of the year and $4632.10 at the end of the year. Your bank advertises “continuous compounding,” but in fact, it compounds continuously over each 24-hour day and posts interest to accounts daily.

  1. What effective rate did you receive?
  2. What nominal rate is the calculation based on?
  3. What difference is there between what the bank is doing and true continuous compounding?