1 Assignment \( 02- \) Questions Question 1 Determine the equivalent continuous compounding rate (to two decimal places) of an interest rate of \( 17,5 \% \) per year, compounded quarterly.

To find the equivalent continuous compounding rate from a nominal rate that is compounded quarterly, you can use the formula: \[ r_c = n \cdot \ln\left(1 + \frac{r}{n}\right) \] where \( r \) is the nominal annual interest rate (in decimal form), and \( n \) is the number of compounding periods per year. For an interest rate of \( 17.5\% \) per annum compounded quarterly, \( r = 0.175 \) and \( n = 4 \). Plugging in those values: \[ r_c = 4 \cdot \ln\left(1 + \frac{0.175}{4}\right) \] This works out to approximately \( r_c \approx 0.1783 \), or \( 17.83\% \) when expressed as a percentage. Thus, the equivalent continuous compounding rate is approximately \( 17.83\% \) per year.