An investment of €500,000 today that grows to €800,000 after six years has a stated annual interest rate closest to:

[S2000magician]

@ImBruces

@S2000magician

@ImBruces

The only way I found to do is 500000 CHS PV 800000 FV 12N 0 PMT

asks for i = 3,9944 than i multiply for 2 get nearly 8% semianually compounded

Pretty sure there`s a alternative to do it through, was looking for it…

That’s the semiannually compounded stated rate:

Stated rate_semiannual = [(1 + EAR)^1/2 – 1] × 2

More generally, for compounding n times per year:

Stated rate__n_ = [(1 + EAR)^1/n – 1] × n

Now . . . what about the continuously compounded formula?

In what page of the CFA curriculum is this formula?

I don’t have the 2020 curriculum.

In the 2019 curriculum, there’s a formula on p. 313, the first formula under Stated and Effective Rates, that is equivalent to this one; that formula is solved for EAR instead of being solved for the stated rate, but you can get this formula from that one using bit of algebra.

[breadmaker]

@breadmaker

It makes me very happy to see you doing this kind of problem by hand in order to understand the mechanics.

I know you use the HP, but the BA II has a nominal to EAR converter. Does the HP have something similar? It would save you time and grief.

Good news: A quick look at the HP manual showed functionality to calculate nominal rates based on compounding frequency, amounts, and time. You will read the manual to familiarize yourself with this potentially exam-saving tool, riiiiiiiiiiiiiiiiiiiight??? Because they actually LET you bring in an officially approved calculator, riiiiiiiiiiiiight???

[ImBruces]

@breadmaker

@breadmaker

It makes me very happy to see you doing this kind of problem by hand in order to understand the mechanics.

I know you use the HP, but the BA II has a nominal to EAR converter. Does the HP have something similar? It would save you time and grief.

Good news: A quick look at the HP manual showed functionality to calculate nominal rates based on compounding frequency, amounts, and time. You will read the manual to familiarize yourself with this potentially exam-saving tool, riiiiiiiiiiiiiiiiiiiight??? Because they actually LET you bring in an officially approved calculator, riiiiiiiiiiiiight???

I found the EAR on HP12c on another forum:

HP12c g END f CLX 7 enter (nominal rate) 365 N / i (daily rate) CHS PMT FV

you get 7,25

Now I`m gonna look for STR

althrough for me remembering this method would maybe actually be harder than the formula lol

[ImBruces]

edit:

after practicing is way easier with the formula above

but im still trying to find SAR for HP12c