Page 102 - FINAL CFA SLIDES DECEMBER 2018 DAY 3
P. 102
Session Unit 3:
10. Common Probability Distributions
LOS 10.o: Distinguish between discretely and continuously compounded rates of return and calculate and
interpret a continuously compounded rate of return, given a specific holding period return, p.232
Discretely compounded returns are just the compound returns we are familiar with,
given some discrete compounding period, such as semi-annual or quarterly.
Recall ?
And for continuous compounding, recall?
Also stated as:
Example: Calculating continuously compounded returns: A stock was
purchased for $100 and sold one year later for $120. Calculate the investor’s
annual rate of return on a continuously compounded basis.
B. ln(23 / 20) = 0.1398
