Question

3. What effective interest rate per year is equal to 1.4% per month, compounded continuously?

Answer 1

Q-3)

Interest rate per month = 1.4%

Annual percentage rate = 1.4%*12 = 16.8%

Calculating the Effective Annual Interest rate of compounded continuously:-

EAR = e^r - 1

where, r = APR = 16.8%

EAR = e^(0.168) - 1

EAR = 1.1829366 - 1

EAR = 18.2937%

So, effective interest rate is 18.29%

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating