The compounding frequency for an interest rate defines
A. The frequency with which interest is paid
B. A unit of measurement for the interest rate
C. The relationship between the annual interest rate and the monthly interest rate
D. None of the above
An interest rate is 6% per annum with annual compounding. What is the equivalent rate with continuous compounding?
A. 5.79%
B. 6.21%
C. 5.83%
D. 6.18%
An interest rate is 5% per annum with continuous compounding. What is the equivalent rate with semiannual compounding?
A. 5.06%
B. 5.03%
C. 4.97%
D. 4.94%
The two-year zero rate is 6% and the three year zero rate is 6.5%. What is the forward rate for the third year? All rates are continuously compounded.
A. 6.75%
B. 7.0%
C. 7.25%
D. 7.5%