When the Interest Rate Is 5% Per Annum with Continuous

question 3

Multiple Choice

When the interest rate is 5% per annum with continuous compounding,which of the following creates a principal protected note worth $1000?

• A) A one-year zero-coupon bond plus a one-year call option worth about $59
• B) A one-year zero-coupon bond plus a one-year call option worth about $49
• C) A one-year zero-coupon bond plus a one-year call option worth about $39
• D) A one-year zero-coupon bond plus a one-year call option worth about $29

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