Introduction to Basic Fixed Income Securities | Coursera

| February 25, 2017

Question
Introduction to Basic Fixed Income Securities | Coursera
Q1
Suppose the borrowing rater B =10% compounded annually. However, the lending rate (or equivalently, the interest rate on deposits) is only 8% compounded annually. Compute the difference between the upper and lower bounds on the price of an perpetuity that pays A = 10, 000$ per year.
Q2

Introduction to Basic Fixed Income Securities | Coursera
Suppose we hold a forward contract on a stock with expiration 6 months from now. We entered into this contract6months ago so that when we entered into the contract, the expiration wasT= 1year. The stock price$6months ago wasS0= 100, thecurrent stock price is125and the current interest rate isr= 10%compounded semi-annually. (This is the same rate that prevailed6months ago.) What is the current value of our forward contract?

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