1. The spot price for a stock is 126:85 while the forward price for delivery in three months is 129:46: Determine the continuously compounded loan repo rate.

2. The continuously compounded interest rates r(t) for maturity t are given by r(t) = 2:16 + :263t :0082t 2 a. Determine the corresponding forward rate curve and graph the two curves as functions of t using excel. Let t range from zero to twenty years in steps of :25 for your graph. b. Explain the relationship you observe between the two curves.

3. Presented below is a Table of Cotton Futures prices on the dates in column one for the maturities in columns 2 and 3 with the respective futures prices in columns 4 and 5. Suppose the forward interest rate between the two maturities is 1:28% continuously compounded. a. Determine the net convenience yield between the two maturities on July 17, 2017. b. Use this convenience yield to quote on the second maturity futures price based on the rst maturity price on July 31, 2017, assuming that the forward interest rate is unchanged.

4. a. Compute the annualized standard deviation of daily returns for the price data in columns 4 and 5 of the Table below. Use 252 days per year for the annualization. b. Compute Ft the ratio of the prices in column 5 to the prices in column 4. Then compute the annualized standard deviation of the daily return on Ft as measured by the logarithm of the ratio Ft=Ft1: c. Comment on the comparison of the standard deviations obtained in parts a. and