For a 10-Year Deposit,what Annual Rate Payable Semiannually Will Produce

question 6

Multiple Choice

For a 10-year deposit,what annual rate payable semiannually will produce the same effective rate as 5.75% compounded continuously? Do not round your intermediate calculations.

• A) 5.43%
• B) 5.83%
• C) 6.53%
• D) 6.88%
• E) 4.38%

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Definitions:

Stripped Treasuries

U.S. Treasury securities that have separated their interest and principal payments into two distinct securities, allowing investors to receive either a lump sum at maturity or periodic interest payments.

Treasury Securities

Debt instruments issued by the government to finance its expenditures, considered low-risk investments.

On the Run

Refers to the most recently issued (and therefore typically the most liquid) government bonds or securities.

Forward Rate

An agreed-upon rate for a financial transaction that will occur at a future date.