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Q&A Bank, Part 1, Q1.25

  • Thread starter Swati Balasubramanian
  • Start date
S

Swati Balasubramanian

Member
In the solution of this question why the accumulation period has been assumed to be 7 year instead of a single year? Can you plzz explain it?:confused:
 
Only to avoid a more complicated formula. By taking the 7th route at the end they are converting back to an annual rate.
You could accumulate one day at a time if you wanted to, using a term of 1/365 for each day. Then set this equal to (1+i)^(7/365) and you get the same formula without the 365s.
 
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