CHAPTER 6
Interest Rate Futures
Practice Questions
Problem 6.1.
A U.S. Treasury bond pays a 7% coupon on January 7 and July 7. How much interest accrues
per $100 of principal to the bond holder between July 7, 2014 and August 8, 2014? How
would your answe
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 c
CHAPTER 7
Swaps
Practice Questions
Problem 7.1.
Companies A and B have been offered the following rates per annum on a $20 million fiveyear loan:
Company A
Company B
Fixed Rate
5.0%
6.4%
Floating Rate
LIBOR+0.1%
LIBOR+0.6%
Company A requires a floating-ra
CHAPTER 13
Binomial Trees
Practice Questions
Problem 13.1.
A stock price is currently $40. It is known that at the end of one month it will be either $42 or
$38. The risk-free interest rate is 8% per annum with continuous compounding. What is the
value of