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Differential Equations in Finance

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Multiple Choice

What is the differential equation that describes the growth of a continuously compounded investment?

  1. $$\frac{dy}{dt} = ry$$
  2. $$\frac{dy}{dt} = y$$
  3. $$\frac{dy}{dt} = y^2$$
  4. $$\frac{dy}{dt} = e^y$$
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