A Bank offers both loans and deposits at a nominal interest rate of 4% that is continuously compounded. What is the effective rate offered by the bank? The bank also offers a 3-year bond with face value £10000, redeemable at par, with 10% annual coupons. What is the final payment of that bond? Assuming there are no arbitrage opportunities, what is the price of the above bond? Give your answer to five valid digits

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A Bank offers both loans and deposits at a nominal  interest rate of 4% that is continuously compounded.
 What is the effective rate offered by the bank? 
The bank also offers a 3-year bond with face value £10000, redeemable at par, with 10% annual coupons. What is the final payment of that bond? 
 Assuming there are no arbitrage opportunities, what is the price of the above bond? Give your answer to five valid digits.

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