1. A bank is going to issue $5,000,000 in 10-year per value bonds that pay a 6% annual coupon. The bank must pay 0.5% of the face value floatation costs. What is the bank’s effective cost of borrowing?

5.9%

6.5%

6.3%

6.1%

6.7%

2. A trader buys a 90-day Eurodollar futures contract at 95.25%. The next day, interest rates rise to 5.25%. What does Jason have to do?

The trader would have to deposit an additional $5,000 into her account

The trader would have to deposit an additional $1,250 into her account

The trader would have to deposit an additional $625 into her account

The trader could withdraw $1,250 from her account

The trader could withdraw $625 from her account