compounding rates

adehbone

Hi all, I have a really silly question. I have come across various expressions for calculating rates/discount factors when t < 1 year.

For example, Libor - 3%, to calculate a 3 Month rate => (1+ 3%) ^ (3/12) = 1.00742.

however I have also come across expressions such as : (1+ 3% * 3/12) = 1.0075

I believe for continuous compounding the first expressions applies. But I have seen both expressions used when no continuous compounding is specifically mentioned. This is from the Scheweser notes.

Any insights?

Thanks!