1. Calculate the payoff at expiration for a call holder on an option on a Eurodollar future, where the underlying IMM index value at expiration using the IMM quotation on a 90-day dollar denominated time deposit on a $1,000,000 notional principal is 98.76 and the “exercise price” (also as an IMM index value) is 98.60

$0

$250

$300

$350

$400

2. BETA COEFFICIENT Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 10.75%; rRF = 5.4%; rM = 12.5%. Round your answer to two decimal places.

3. A bond matures in 25 years but is callable in 12 years at 121. The call premium decreases by 1 percent of par per year. If the bond is called in 15 years, how much will you receive?

4. Would you rather invest in an account that pays 7%annual compounding or 7% with monthly compounding? Would you rather borrow at 7% and make annual or monthly payments? And why?