25 May Question 1) The compounding frequency for an interest rate defines
Question
1) The compounding frequency for an interest rate defines
A) The frequency with which interest is paid
B) A unit of measurement for the interest rate
C) The relationship between the annual interest rate and the monthly interest rate
D) None of the above
2) An interest rate is 6% per annum with annual compounding. What is the equivalent rate with continuous compounding?
A) 5.79%
B) 6.21%
C) 5.83%
D) 6.18%
3) An interest rate is 5% per annum with continuous compounding. What is the equivalent rate with semiannual compounding?
A) 5.06%
B) 5.03%
C) 4.97%
D) 4.94%
4) An interest rate is 12% per annum with semiannual compounding. What is the equivalent rate with quarterly compounding?
A) 11.83%
B) 11.66%
C) 11.77%
D) 11.92%
5) The two-year zero rate is 6% and the three year zero rate is 6.5%. What is the forward rate for the third year? All rates are continuously compounded.
A) 6.75%
B) 7.0%
C) 7.25%
D) 7.5%
6) The six-month zero rate is 8% per annum with semiannual compounding. The price of a one-
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