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  3. 7 all of the following problems involve interest that is...

Question: 7 all of the following problems involve interest that is...

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7. All of the following problems involve interest that is being compounded continuously (a) Compute the interest rate needed in order to double an invest- (b) With a 10% interest, how long will it take to triple my initial (c) Irvin forgot what is the interest rate at his bank. All he knows is ment every seven years. investment. that after five years, his initial investment doubled. When will it triple? (Hint: There are two unknowns; one is the interest rate. Whenever there are two unknowns, two equations are needed. So, use the information about money at different times in an appropriate manner.) (d) A person has money withdrawn from his savings account to be placed in his checking account at a continuous basis. This is at a rate of $10,000 a year. This person started with $20,000 placed in the savings account that has a 5% interest. How much will be in the savings account in one year? (Hint: A different expression for the growth of money needs to be derived. So, start with AM and instead of the Eq. 2.4 expression, determine what ΔΜ equals in this setting. Then, solve the equation.) 8. There are two days until expiration date. Patty wants to sell a Call with strike price $100; i.e. she wants to go short on C1oo. The interest rate is r 10% and the current value of the stock in $120. Use the put-call parity expression to find a lower bound on the value of this Call. 9. Igor read in the press this morning that, for an expiration date of a year from now (with 5% interest) that C60(70) 9 and Po(70-4. How can he use this information to make some money?
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