1. Which of the following is true of the capital requirement? Check all that apply.
Its intended goal is to protect the interests of those who hold equity in the bank.
It specifies a minimum leverage ratio for all banks.
The amount of capital required depends on the type of assets the bank holds.
2. Suppose that zero interest rates with continuous compounding are as follows:
Maturity (years) 1, 2 , 3.
Zero Rates (% per annum) 2.0, 3.0, ? .
Forward rates (% per annum). -, ? , 5.1 .
Calculate the forward rate from year 1 to year 2 and calculate the zero rate year 3.