What is the continuously compounded forward rate, Mathematics

Assignment Help:

At time t an investor shorts a $1 face value zero coupon bond that matures at time T = t

and uses the entire proceeds to purchase a zero coupon bond that matures at time S = T.

(a) In what quantity is the zero coupon bond that matures at time S purchased? Your answer should be expressed in terms of the time t prices P(t;T) and P (t;S).

(b) Explain why these transactions are equivalent to agreeing to lend over the future period [T, S] at a rate that is determined at time t.

(c) What is the continuously compounded forward rate f(t;T;S) associated with this loan?

 


Related Discussions:- What is the continuously compounded forward rate

Differentiation formulas, Differentiation Formulas : We will begin this s...

Differentiation Formulas : We will begin this section with some basic properties and formulas.  We will give the properties & formulas in this section in both "prime" notation &

Law of Sine and Cosine Word Problems, A poll tilts towards the sun at an 8 ...

A poll tilts towards the sun at an 8 o angle from the vertical at it casta 22-ft shadow. The angle of elevation from the shadow to the top of the pole is 43 o . How tall is th

Technical Mathematic, Convert or Reduce Reduce 4,500 micrograms to grams

Convert or Reduce Reduce 4,500 micrograms to grams

Dividing whole numbers, Dividing Whole Numbers: Example: Divide 3...

Dividing Whole Numbers: Example: Divide 347 by 5. Solution:                      Beginning from the left of the dividend, the divisor is divided into the

Pre Calculus, I have no idea how to graph exponential forms.

I have no idea how to graph exponential forms.

Help with individual questions, Hi, I''m looking for assistance/solutions t...

Hi, I''m looking for assistance/solutions to individual questions. I''ve already answered them but seek confirmation my answers are correct. I don''t want answers to a complete e

Define combined functions, Q. Define Combined Functions? Ans. We a...

Q. Define Combined Functions? Ans. We are often interested in functions which combine a trigonometric function with another type of function.  For example, y = x + sinx wi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd