duction to Basic Fixed Income Securities | Coursera

1. Q1
2. SupposetheborrowingraterB=10%compoundedannually.However,thelendingrate(orequivalently,theinterestrateondeposits)isonly8%compoundedannually.ComputethedifferencebetweentheupperandlowerboundsonthepriceofanperpetuitythatpaysA=10,000$peryear.

Q2

Introduction to Basic Fixed Income Securities | Coursera

Suppose we hold a forward contract on a stock with expiration 6months from now. We entered into this contract 6 months ago so that when we entered into the contract, the expiration was T = 1 year. The stock price$ 6 months ago was S0 = 100, thecurrent stock price is 125 and the current interest rate is r = 10%compounded semi-annually. (This is the same rate that prevailed 6 months ago.) What is the current value of our forward contract?