Assume a = 0.25, b = 0.13, r = 0.06, and ? = 0.25. Using the CIR model, calculate the gamma of a zero coupon bond maturing in 3 years

A) 2.14
B) 2.34
C) 2.54
D) 2.74

D

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Indicate whether the statement is true or false

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An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?

A) The interest earned in year one is $8.32 and the interest earned in year two is $8.32. B) The interest earned in year one is $8.00 and the interest earned in year two is $8.64. C) The interest earned in year one is $8.64 and the interest earned in year two is $8.00. D) There is not enough information to solve this problem.

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