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
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