What is the annual percentage rate of 14.9% compounded continuously?

Question

Quizplus · Accepted Answer

The formula for continuous compounding is $A = P e^{rt}$, where $A$ is the amount after time $t$, $P$ is the principal amount, $r$ is the annual interest rate, and $e$ is the base of the natural logarithm (approximately 2.71828). When calculating the annual percentage rate (APR) for a continuously compounded interest rate, you use the formula for continuous compounding but solve for the effective annual rate (EAR), which gives you $EAR = e^r - 1$, where $r$ is the nominal interest rate expressed as a decimal. For a 14.9% interest rate, $r = 0.149$, so the calculation is $EAR = e^{0.149} - 1$. This calculation gives you an EAR of approximately 0.1607 or 16.07%.

What Is the Annual Percentage Rate of 14