I found that the effective federal fund rate reach to something like 13% in 1982. Based on my trading experience, I could earn this risk free rate compounding daily by investing in (CME_FF / SHV etc.). Suppose the federal fund rate does not change during 1982, which of the following is True?
(A) it means after 1 year, a deposit of 10000USD leads to 11300USD? This essentially means daily rate is 1.13^(1/365.25)-1 = 0.00033467, means 10000USD deposit earns 3.3467USD one day.
(B)or it means each day, the daily rate is 0.13/360=0.000361111, means 10000USD deposit earns 3.61111USD one day. This means after one year, my annual rate is effectively (1+0.000361111)^365.25 - 1= 0.140962248, meaning a deposit of 10000USD becomes 11409.622USD.
I am quite confused. Thank you.