1.

a. A bond costs $67,032 today and pays $100,000 in 5 years. What is its continuously compounded rate of return?

b. A bond costs $50 today, pays $100 at maturity, and has a continuously compounded annual return of 10%. In how many years does it mature?

c. An investment of $5 today pays a continuously compounded rate of 7.5% per year. How much money will you have after 7 years?

d. A stock selling for $100 is worth $5 1 year later. What is the continuously compounded return over the year? What if the stock price is $4? $3? $2? What would the stock price after 1 year have to be in order for the continuously compounded return to be −500%?