When the Interest Rate Is 5% Per Annum with Continuous

question 20

Multiple Choice

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

• 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

---

Definitions:

Contingency Planning

Planning that identifies alternative courses of action to take when things go wrong.

Trigger Points

Specific conditions or events that initiate a particular action, reaction, or series of events.

Contingency Planning

The process of preparing for unexpected events by developing strategies to minimize impacts and continue operations.

Early Identification

The process of recognizing potential issues, opportunities, or conditions at an initial stage to allow for timely intervention.