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Question $1$

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Suppose the $1-$year zero rate is $3\%$ per annum, the $2-$year zero rate is $4\%$ per annum, and the $3-$year zero rate is $4\mathrm{.}6\%$ per annum, all continuously compounded. What is the forward rate per annum for the third year? The present value of this bond is $95.$ Select the most suitable answer.

Question $1$Answer

a$.$

$5\mathrm{.}8\%$

b$.$

$6\mathrm{.}5\%$

c$.$

$5\mathrm{.}0\%$

d$.$

$4\mathrm{.}8\%$

e$.$

$6\mathrm{.}2\%$

Question $2$

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Bank Monash quotes the interest rate on loans as $13\%$ per annum continuously compounded. The interest is paid monthly on a $$8639$ loan. What is the interest payment $($in $$)$ of this loan per month? Select the most suitable answer.

Question $2$Answer

a$.$

$94\mathrm{.}10$

b$.$

$1129\mathrm{.}18$

c$.$

$88\mathrm{.}00$

d$.$

$79\mathrm{.}55$

e$.$

$285\mathrm{.}38$

Question $3$

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Which of the following option is false? Select the most suitable answer.

Question $3$Answer

a$.$

Forward contracts are popular in the foreign exchange market to hedge foreign exchange risk.

b$.$

The payoff of long forward increases as the price of the asset rises.

c$.$

Forward contracts are standardized in the exchanges of a few particular countries.

d$.$

The forward price is the delivery price that makes the contract worth zero today.

e$.$

One of the parties to a forward contract assumes a long position and agrees to buy the underlying asset on a certain specified future date for a specified price.