Exercise 1:

a) If the quarterly effective interest rate is 2%, what is the effective 6-months rate?;

b) If the quarterly effective interest rate is 2%, what is the effective 4-months rate?;

c) If the 2-month effective interest rate is 2%, what is the 2-year effective rate?;

d) If the 6-month effective rate is 2%, what is the 2- month effective rate.

Exercise 2: What is the market value of a perpetuity that pays 100 every 2 months forever (starting from the end of month 8, i.e. point in time 8)? The quoted discount rate is 6% compounded every two months.

Exercise 3: What is the market value of a perpetuity that pays 10,000 every 5 years forever (starting from the end of year 8, i.e. point in time 8)? The effective annual rate is 5%.