### Calculate forward interest rates for second and third years

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1. What is the six-­-month forward price for a stock providing no income. The stock price is 50 and the continuouslycompounded interest rate is 1.56%? What is the forwardprice if the stock pays a 1%, 2%, 3% continuously compounded dividend yield?

2. Suppose that the spot interest rates with continuous compounding are: Maturity (years) Rate % 1 1.3 2 2.2 3 2.3 Calculate forward interest rates for second and third years, and for a 2-year period between years 1 and 3.

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