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You are given the rate on a loan with a default risk is 7.32%, the rate on a loan with the same term without
You are given the rate on a loan with a default risk is 7.32%, the rate on a loan with the same term without default risk is 4.09%, and the inflation rate is 1.19%. Let s1 be the compensation for default risk when all rates are compounded continuously, and s2 be the compensation for default risk when all rates are effective annually. Compute the difference 100*(s1 - s2).
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Introduction to Operations Research
Authors: Frederick S. Hillier, Gerald J. Lieberman
10th edition
978-0072535105, 72535105, 978-1259162985
