Impact of compounding When we compound m times per year at rate r an amount a grows to A(1+ r/mym in one year Compounding freguency Value of $100 in one year at 10%0 Annual(m=1) 110.00 Semiannual(m=2) 11025 Quarterly(m=4) 11038 Mont thly(m=12) 0.47 Weekly(m=52) 11051 Daily(m=365) 11052 Options, Futures, and other Derivatives 8th Edition Copyright o John C. Hull 2012Impact of Compounding When we compound m times per year at rate R an amount A grows to A(1+R/m) m in one year Options, Futures, and Other Derivatives 8th Edition, Copyright © John C. Hull 2012 8 Compounding frequency Value of $100 in one year at 10% Annual (m=1) 110.00 Semiannual (m=2) 110.25 Quarterly (m=4) 110.38 Monthly (m=12) 110.47 Weekly (m=52) 110.51 Daily (m=365) 110.52