00:01
Now here i use the gross formula, which is simple form is pn equals p0, 1 plus r over 100, power of n.
00:13
Now, i want an effective rate of 4%, which means if i invest $100, that's my p0, i end up after one year, $104.
00:29
I earn 4 % of 100 in one year and get 104.
00:36
Now, i want to work out r if i compound daily.
00:41
So, 1 plus r, if i compound daily, i divide the rate by 365 over 100.
00:56
It's the yearly rate r divided by 365 days in a year.
01:02
Now, n is number of time periods.
01:06
If i am compounding daily, then in one year is going to be 365 days.
01:17
So, this whole equation here represents one year, effective rate 4%, given by the 104 on the left, and r is the rate compounding daily.
01:32
So from this, i want to work out r.
01:36
First step, let's divide both sides by 100.
01:41
So 1 .04 equals 1 plus r over 36500, power of 365 .5.
01:57
A bit simpler...