1. Suppose the foreign exchange rate is 0.70and the six-month U.S. and foreign risk-free rates are 5% and 7% (expressed with continuous compounding). What is the six-month forward rate?Round your answer to4 decimal places.
2. McDonaldsis a stock that pays dividends.Suppose the current price of McDonalds is $30 and the risk-free rate for all maturities is 10% with continuous compounding. McDonalds will pay a dividend of $2 at the end of the first year and also at the end of the second year. It will NOT paya dividendat the end of the third year. What is the three-year forward price forMcDonalds?