What is the annual nominal rate compounded daily for a bond that has an annual yield of 5.4%? Round to three decimal places. Use a 365 day year.
Set up the accumulation equation:
(1+i)^365 = 1.054
Take the natural log of each side
365 * Ln(1 + i) = 1.054
Ln(1 + i) = 0.000144089
Use each side as a exponent to eulers constant e
(1 + i) = e^0.000144089
1 + i = 1.000144099
i = 0.000144099 or .0144099%
Set up the accumulation equation:
(1+i)^365 = 1.054
Take the natural log of each side
365 * Ln(1 + i) = 1.054
Ln(1 + i) = 0.000144089
Use each side as a exponent to eulers constant e
(1 + i) = e^0.000144089
1 + i = 1.000144099
i = 0.000144099 or .0144099%