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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)


ContCompRate
(PeriodicRate, PeriodsPerYear)

  • PeriodicRate is the nominal interest rate you wish to convert
  • PeriodsPerYear is the number of annual compounding periods associated with the PeriodicRate.
Examples
  • 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)".

Code
To install this function, copy the entire contents of the window below into your power4XL code module in Excel's Visual Basic editor.

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

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