1. Suppose a companys $50 stock pays an 8% continuous dividend and the continuously compounded risk-free rate is 6%. Calculate the following:

   a. the price of a prepaid forward contract that expires 1 year from now

   b. the price of a forward contract that expires 1 year from now

   (Hint: You will need a scientific calculator.)

2. Suppose the gold spot price is $1700/oz, the 1-year forward price is 1760.54, and the continuously compounded risk-free rate is 4%. Calculate the following:

   a. the lease rate

   b. the return on a cash-and-carry if gold cannot be loaned

   c. the return on a cash-and-carry if gold is loaned and it earns the lease rate (Hint: You will need a scientific calculator.)

3. Compute Macaulay and modied durations for the following bonds:

   a. a 5-year bond paying annual coupons of 3.322% and selling at par

   b. an 8-year bond paying semiannual coupons with a coupon rate of 9% and a yield of 8%

   c. a 10-year bond paying annual coupons of 5% with a price of $96 and a maturity value of $100