You have a choice between receiving $550 now or $570 in six months' time. Current interest rates are 10% p.a. (simple interest). a) As a rational investor, which option would you choose, and why? b) Calculate the minimum interest rate p.a. that would reverse your choice above.

What is the appropriate risk-free rate on May 11, 2022 for an option that expires on Oct 20, 2022 if the T-bill with closest maturity is quoted as 3.65/3.44? a. What is the un-annualized discount rate? Round your answer to two decimals. b. What is the T-bill price? Round your answer to two decimals b . What is the approximate risk-free rate? % Round your answer to two decimals

4) Retirement: You have just retired from your company after working for twenty years. Your company provides a retirement package and gives you the option of i) receiving $250,000 today, or ii) receiving $350,000 in five years (T=5). What option would you select if the interest rate is R=5%? What option would you select if the interest rate is R=10%? What interest rate would make the present value of both options equal? (Hint: use Excel’s Data-What If - Goal Seek to solve for the interest rate T).

You want to buy a house that has a purchase price of $190,000. You plan to make a down payment of 10% of the purchase price and then borrow the rest. What is the dollar value of your down payment? $ 19,000 How much money will you need to borrow? $ 171,000 You have the option to take out a 30-year mortgage that has an APR of 4% or a 20-year mortgage that has an APR of 3.25%. When answering the following questions, remember to base your mortgage payments on the amount you need to borrow rather than the entire purchase price. 30-year mortgage If you take out a 30-year mortgage with an APR of 4%, what will your monthly payment be? (Round your answer to the nearest cent.) $ 816.38 If you make the payment you just calculated every month for 30 years, how much will you pay altogether? $ What dollar amount of your total 30-year mortgage payments go to interest? Hint: The dollar amount of your interest is the difference between your total payments and the amount you borrowed. $ What percentage…

(B). An investor must choose between two options. The first option (A) offers AED 10m for AED 2m a year for 5 years. The second option (B) offers AED 11m of AED 1m a year for four years and AED 7m in year 5. (a). Compare the present value of each option by assuming a range of the required rate of return of the investor, say 8%, 9%, 10%, 11%, and 12%. What is your advice?

Suppose you want to detemine the forward rates for your client, a lender who is considering a Forward Rate Ageement (FRA). You have collected and organized the data for the risk-free zero interest rates with continuous compounding in the following table: Maturity(years) Zero Rate (% per annum) 1 2 3 4 2 3 5 6 5 What is the forward rate for the fourth year? (sample answer: 2.50%) Blank 1 What is the forward rate for the fifth year? (sample answer: 2.50%) Blank 2 7

Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. If the price of the call option is 7.17, describe the arbitrage that would be possible, and calculate the profit that would result.

Find the monthly payment for the 15- year option.

Suppose the interest rate is 3.9%. a. Having $350 today is equivalent to having what amount in one year? b. Having $350 in one year is equivalent to having what amount today? c. Which would you prefer, $350 today or $350 in one year? Does your answer depend on when you need the money? Why or why not? a. Having $350 today is equivalent to having what amount in one year? It is equivalent to $. (Round to the nearest cent.)