Fundamentals of Futures and Options Markets, 8e (Hull) Chapter 4 Interest Rates

1)
The compounding frequency for an interest rate defines
A)
The frequency with which interest is paid
B)
A unit of measurement for the interest rate
C)
The relationship between the annual interest rate and the monthly interest rate
D)
None of the above

2)
An interest rate is 6% per annum with annual compounding. What is the
equivalent rate with continuous compounding?
A)
5.79%
B)
6.21%
C)
5.83%
D)
6.18%

3)
An interest rate is 5% per annum with continuous compounding. What is the
equivalent rate with semiannual compounding?
A)
5.06%
B)
5.03%
C)
4.97%
D)
4.94%

4)
An interest rate is 12% per annum with semiannual compounding. What is the
equivalent rate with quarterly compounding?
A)
11.83%
B)
11.66%
C)
11.77%
D)
11.92%

5)
The two-year zero rate is 6% and the three year zero rate is 6.5%. What is the
forward rate for the third year? All rates are continuously compounded.
A)
6.75%
B)
7.0%
C)
7.25%
D)
7.5%

6)
The six-month zero rate is 8% per annum with semiannual compounding. The price
of a one-year bond that provides a coupon of 6% per annum semiannually is 97.
What is the one-year continuously compounded zero rate?
A)
8.02%
B)
8.52%
C)
9.02%
D)
9.52%
7)
The yield curve is flat at 6% per annum. What is the value of an FRA where the
holder receives interest at the rate of 8% per annum for a six-month period on
a principal of $1,000 starting in two years? All rates are compounded
semiannually.
A)
$9.12
B)
$9.02
C)
$8.88
D)
$8.63