A bank quotes you an interest rate of 12% per annum with monthly compounding. What is the equivalent rate with continuous compounding?
A bank quotes you an interest rate of 12% per annum with monthly compounding. What is...
A bank quotes you an interest rate of 12% per annum with monthly compounding. What is the equivalent rate with continuous compounding? 12.22% 11.94% 11.85% 12.12%
An interest rate is 7% per annum with continuous compounding. What is the equivalent rate with quarterly compounding? Choose from the following; 6.96% 7.06% 6.26% 7.16%
1. The interest rate is 2% per annum with continuous compounding and a bank wants to create a $1,000 principal protected note using a five-year zero-coupon bond plus a five-year call option. What is the maximum price of the call option that will make this product viable for the bank (answer in $ and round to the nearest cent)? 2. Call options with strike prices of $70 and $87 cost $16 and $12, respectively. An investor creates a bear spread...
A bank CD would give you 3.19% APR with monthly compounding what’s the interest rate compounding period for this CD
Suppose that the risk-free interest rate is 8% per annum with continuous compounding and that the dividend yield on a stock index is 3% per annum with continuous compounding. The index is standing at 350 and the futures price for a contract deliverable in 6months is 360. #1) What should be the theoretical futures price for the stock index? #2) What arbitrage opportunities does this create? #1) theoretical futures price = $366.38 #1) theoretical futures price = $358.86 #1) theoretical...
1. You are shopping for a loan, and a bank quotes you a rate of 6% (expressedas an APR with continuous compounding). The loan amount is $100,000 and requiresmonthly interest payments. The loan principal will not be paid until the loan maturityin 10 years. What would be the monthly interest payment that you would have tomake on this loan? 2. A few days ago, you entered into 5 futures contracts to buy a stock index at $3,323. Your initial margin...
You approach your local bank for a loan. The bank quotes a rate of 5.89% with an effective annual rate of 6%. Does the bank use annual, quarterly, or monthly compounding?
Question 3 If money is invested for 3 years, the per annum simple interest rate equivalent to a nominal rate of 12.5%p.a compounding monthly is (as a percentage rounded to three decimal places; don’t use % sign):
Suppose that zero interest rates are per annum with continuous compounding are as follows: Maturity (years) Rate (% per annum) (1, 2.5) (2, 3.0) (3, 3.5) (4, 4.2) (5, 4.7) Calculate 1-year forward interest rates for the second (f1,2), third (f2,3), fourth (f3,4), and fifth (f4,5) years. Use the rates in the previous part to value an FRA today as the borrower with 5% per annum for the third year on $1 million. (FRA is for the year starting at...
1. Narelle borrows $600,000 on a 25-year property loan at 4 percent per annum compounding monthly. The loan provides for interest-only payments for 5 years and then reverts to principal and interest repayments sufficient to repay the loan within the original 25-year period. Assume rates do not change. a) Calculate the monthly repayment for the first 5 years. (CLUE: it is INTEREST ONLY) (2 marks) b) Calculate the new monthly repayment after 5 years assuming the interest rate does not...