Tutorial 2 Questions and Solutions
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

Tutorial 3 Questions and Solutions
Problem 12.1.
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 a one-mon

Tutorial 1 Questions and Solutions
Problem 5.3.
Suppose that you enter into a six-month forward contract on a non-dividend-paying stock
when the stock price is $30 and the risk-free interest rate (with continuous compounding) is
12% per annum. What is the

Tutorial 4 & 5 Questions and Solutions
Problem 14.4.
Calculate the price of a three-month European put option on a non-dividend-paying stock
with a strike price of $50 when the current stock price is $50, the risk-free interest rate is
10% per annum, and