1 Forward and Futures Prices Problem 1.1. The risk-free rate of interest is 3% per annum with continuous compounding, and the dividend yield on a stock index is 1.8% per annum. The current value of the index is 500. What is the six-month futures price? Problem 1.2. The risk-free rate of interest is 5% per annum with continuous compounding. A stock is trading at $60. The stock pays dividend of $0.50 every quarter. The next dividend will be paid after 1 month. What is the six-month futures price of the stock? Problem 1.3. The risk-free rate of interest is 4% per annum with continuous compounding, and the ficed dividend yield on a stock index is 2% per annum. The three-month stock index futures price is $80 and the six-month stock index futures price is $81. Describe an arbitrage strategy Problem 1.4. The three-month interest rates in the United Kingdom and the United States are 0.7% and 1.6% per annum, respectively, with continuous compounding. The spot price of the British pound sterling is $1.3000. The futures price for a contract deliverable in three months is $1.3050. What arbitrage opportunities does this create