期权期货与其他衍生产品第九版课后练习题与答案Chapter (4).pdfVIP

CHAPTER 4 Interest Rates Practice Questions Problem 4.1. A bank quotes you an interest rate of 14% per annum with quarterly compounding. What is the equivalent rate with (a) continuous compounding and (b) annual compounding? (a) The rate with continuous compounding is  014  4ln 1  01376  4  or 13.76% per annum. (b) The rate with annual compounding is 4  014  1  1 01475  4  or 14.75% per annum. Problem 4.2. What is meant by LIBOR and LIBID. Which is higher? LIBOR is the London InterBank Offered Rate. It is calculated daily by the British Bankers Association and is the rate a AA-rated bank requires on deposits it places with other banks. LIBID is the London InterBank Bid rate. It is the rate a bank is prepared to pay on deposits from other AA-rated banks. LIBOR is greater than LIBID. Problem 4.3. The six-month and one-year zero rates are both 10% per annum. For a bond that has a life of 18 months and pays a coupon of 8% per annum (with semiannual payments and one having just been made), the y ield is 10.4% per annum. What is the bond’s price? What is the 18-month zero rate? All rates are quoted with semiannual compounding. Suppose the bond has a face value of $100. Its price is obtained by discounting the cash flows at 10.4%. The price is 4 4 104   9674 2 3 1