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:

Specificity Theory

A theory that suggests the body's senses have specific receptors for different stimuli, relating to how pain is perceived.

Phantom Limb Pain

Refers to the discomfort or distress felt in an area of the body that has been surgically removed, challenges the brain's sensory map.

Skin Receptors

Specialized sensory cells located in the skin that detect stimuli related to touch, pressure, temperature, and pain, sending signals to the brain for interpretation.

Muscle Tension

The state of being contracted or tense in the muscles, often as a response to stress or physical activity, leading to discomfort or pain.