00:01
So here we have a question about compounding, right? and we want them to be equivalent.
00:04
So we want the same payoff after, let's say one year, right? after one year.
00:13
And we know that with monthly, or sorry, with quarterly, what are we going to have after one year if we're compounding quarterly at 10 % rate? well, we would have x.
00:26
Let's suppose that you start off with x.
00:28
You get one plus 10 % over four, but it compounds four times, right? so this would be x outside of 1 .025 to the power of four.
00:40
If you're compounding quarterly at 10 % rate, that's what you're going to have.
00:46
At a monthly basis, if we start with x, each period we're going to get, let's say y over 12, but now we go to the power of 12.
00:57
So we get x to the power, sorry, 1 .1 plus y over 12.
01:03
So 1 .1 plus y over 12 to the power of 12.
01:05
And i want to set these things equal...
