I have some difficulty understanding this topic of interest rates.
For example, if I invest 1 dollar at a continuous compound rate of 11%, my end-of-year value is 0.11 e = 1.116 dollars. From there, it is stated that investing at 11% per year without interruption corresponds to an investment of 11.6% per year.
Now, where does this 11.6 come from? Does it come from the value of 1. (116) dollars? So, I just take the 0.116 decimal and turn it into a percentage?
Another question that I have concerns this problem:
Suppose the compound annual rate is 18.5%. The current value of a 100 USD in perpetuity, with each cash flow received at the end of the year, is 100 / 0.185 = $540.54. If the cash flow is received continuously, we must divide $ 100 by 17% because 17% compounded continuously equals 18.5% compounded annually (stating that e = 0.17 = 1.185).
What is the relationship between the annual compound rate and the permanently compounded rate? How to use one to calculate the other? I am very confused.