A Bank offers both loans and deposits at a nominal interest rate of 5% that is continuously compounded.(a)What is the effective rate offered by the bank? Give your answer to 3 digits. Do not write the % sign. For example, if your answer is 4.15% thenwrite 4.15. Answer:(b)The bank also offers a 3-year bond with face value £10000, redeemable at par, with 10% annual coupons. What is the final payment of thatbond? Do not enter the £ sign. Answer:(C) Tsign. Answer:Assuming there are no arbitrage opportunities, what is the price of the above bond? Give your answer to five valid digits. Do not enter the £

In case of continuous compounding, Effective annual rate of interest = [e^(r) -1] x 100wheree =…

Answered: A Bank offers both loans and deposits…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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