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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Definitions:

Semantic Memory

Long-term memory of general factual knowledge, social customs, and language.

Procedural Memory

Long-term memory of motor skills, habits, and ways of doing things, which can be recalled without conscious effort; sometimes called implicit memory.

Speed of Mental Processes

The rate at which the brain processes information, including perception, memory, and problem-solving.

Comprehension Skills

The ability to understand, process, and interpret written or spoken language.