Suppose that zero interest rates with continuous compounding are as follows: Maturity (years) Rate (% per annum) 1 2.0 2 4.0 3 4.7 4 5.2 5 5.5 Calculate forward interest rates for the second, third, fourth, and fifth years. Draw zero

Assume a problem statement involves only single amounts, that is, no series or gradients, and the interest rate is stated as 12% per year compounded quarterly. For the following n values, determine the proper interest rate to use in the factor equations: (a) n = 20 quarters; (b) n = 10 semiannual periods; (c) n = 5 years.

If we require a 10% real return and we expect inflation to be 7%. Calculate the nominal rate of interest using the fisher effect equation and it's approximation. What is the difference between the two? Respuesta:

Assume an effective compound interest rate i= 3% per annum. Compute the following equivalent rates. In each case, enter your answer as a percentage. a) The nominal interest rate payable semi-annually Number % Enter an answer correct to 4 decimal places. b) The effective interest rate payable quarterly Number Enter an answer correct to 2 decimal places. c) The effective rate of discount per annum Number Enter an answer correct to 2 decimal places. d) The nominal rate of discount payable monthly Number % Enter an answer correct to 4 decimal places.

Assuming that the interest rate is 5% and will remain at that value indefinitely:

Suppose today’s LIBOR rates for 1, 2, 3, 4, 5, and 6 months are 1.6%, 1.8%, 2.0%, 2.0%, 1.9%, and 1.6% with continuous compounding. What are the forward rates for future 1-month periods?

3.8 The following table shows the spot rates of interest over a number of horizons: (b) What is the effective rate of interest earned by this annuity-immediate if it were constant through the whole investment period?  [Hint:  Use the Excel function Rate to compute the rate of interest.] Period of investment (in years) Spot rate (in %) 1           6.00 2           7.00 3           7.75 4           8.25

Assess the following statements: 1. Simple interest calculations assume the interest earned is never reinvested. II. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. II. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.