Question 1

The yield curve is currently flat at 7%. Based on the following information, price a bond with annual coupons, a face value of $100.00 with a

a. 10% coupon rate and maturity in 2 years.

b. 5% coupon rate and maturity in 2 years.

Question 2

A bank quotes an interest rate of 14% per annum with quarterly compounding. What is the equivalent rate with?

a) Continuous compounding, and

b) Annual compounding?

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