1. A bond pays $150 for every $100 invested. What is its continuously compounded interest rate?
2. Explain the difference between shorting in the real world, and shorting in a perfect world.
3. Confirm my claim that you can add continuously compounded interest rates. That is, a bond pays a continuously compounded interest rate of 10%. Upon maturity, the money can be reinvested at a continuously compounded interest rate of 20%. If you invest $100 today, how much money will you end up with? What is the simple and continuously compounded interest rate over the 2 periods?