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Continuous Compounding Interest Rate Conversion

Converts any periodically compounded (monthly, semiannually, etc.) interest rate into the continuously compounded rate.  (The Black-Scholes formula uses the continuously compounded interest rate as an input.)

Syntax  (Values in boldface are required; others are optional)

(PeriodicRate, PeriodsPerYear)

  • PeriodicRate is the nominal interest rate you wish to convert
  • PeriodsPerYear is the number of annual compounding periods associated with the PeriodicRate.
  • To convert a semiannual coupon bond rate of 5% to a continuous compounding rate, enter "=ContCompRate(5%, 2)". 

  • Dividend yield for a security which is priced at $100 and pays quarterly dividends of $1.00 is calculated by the formula "=ContCompRate(4%, 4)".

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For detailed instructions, see the "Individual Function Setup" page.

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