When are we required to use continuous compounding in the CFA exam? Because it seems in schweser, even stock price returns are calculated using holding period return.
think of it that way. Annual comp. - we adjust the sum for an interest rate every year, monthly - every month etc. Imagine that we need to consider it every fraction of a second - that’s continuous compounding. It’s calculated as a limit of an infinite pogression: FV = PV* e^(int.rate*number_of_years)
i don’t think you should use it unless if specified…
^ oops, i didn’t answer the actual question i guess the question would be smth like : calculate $100 compounded continuously for three years
Isnt it In(100)^3?
no - it’s what libra wrote above