1. An interest rate is 8% per annum when expressed with continuous compounding. What is the equivalent rate with semiannual compounding?
2. Which of the following statements are correct?
a) Forward contracts are standardized and trade on an exchange
b) Profits and Losses on Futures contracts are marked to market on a daily basis.
c) Delivery of the assets almost never occurs in the forward market
d) Futures contracts allow you to buy or sell individual stocks for a preset price on the expiration date.
3. Which statement regarding executive stock options is correct?
a) They are short term and usually expire after one year.
b) They should reduce agency costs by making managers act like shareholders
c) The full value of the option is included as compensation expense on the income statement.
d) Managers can sell the options on an exchange.