Asked by jojo
Certain investments compound interest at different intervals. What effect does the size of the compounding interval have on the yield of the investment?
Answers
Answered by
Steve
take a look at the graph of
(1+.10/n)^(n)
It shows the effective yield of 10% compounded n times per year.
It approaches continuous compounding, e^.1
http://www.wolframalpha.com/input/?i=plot+y%3D%281%2B.1%2Fn%29^n+for+n+%3D+1..40%2C+y%3De^.1
(1+.10/n)^(n)
It shows the effective yield of 10% compounded n times per year.
It approaches continuous compounding, e^.1
http://www.wolframalpha.com/input/?i=plot+y%3D%281%2B.1%2Fn%29^n+for+n+%3D+1..40%2C+y%3De^.1
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