All of the following problems involve interest that is being compounded continuously.

7. All of the following problems involve interest that is being compounded continuously. (a) (b) (C) ((0 Compute the interest rate needed to double an investment every seven years. With a 10% interest, how long will it take to triple an initial investment. Irvin forgot what is the interest rate at his bank. All he knows is that after ve years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. So, use the information about money at different times in an appropriate manner.) A person has money withdrawn from his savings account to be placed in his checking account at a continuous xed basis at a rate of $1,000 a year. This person started with $20,000 placed in the savings account that has a 5% interest. How much will be in the savings account in one year? (Hint: A different expression for the growth of money needs to be derived. So, start with AM and, instead of the Equation 2.8 expression, determine what AM equals in this setting. Then, solve the equation.) 8. Two days before expiration date, Patty wants to sell a Call with strike price $100; i.e. she wants to go short on C100,t The interest rate is r = 10%, and the current value of the stock is $120. Use the PutCall Parity Equation to nd a lower bound on the value of C100, 1