Question: Question 1 (Total 20 marks) Ev. a) What is the future value in four years from now of $1,000 invested in an account which pays

Question 1 (Total 20 marks) Ev. a) What is the future

Question 1 (Total 20 marks) Ev. a) What is the future value in four years from now of $1,000 invested in an account which pays an annual percentage rate (APR) of 12%, with i) quarterly compounding, or ii) continuous compounding. Rc (6 marks) b) What is the APR with continuous compounding that is equivalent to 10% with monthly compounding (4 marks) c) What is the APR with semiannual compounding that is equivalent to 15% with continuous compounding. (4 marks) d) If the current 1-year zero rate is 5.0% and 2-year zero rate is 5.8%, what should be the forward interest rate for Year 2. Describe how you can lock in to earn this forward rate for year 2 without using a forward contract. (6 marks)

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