Question: 1. Suppose that spot interest rates with continuous compounding are as follows: Maturity (months) Rate (% per annum) 8.0 8.2 8.4 12 8.5 15 8.6

1. Suppose that spot interest rates with continuous compounding are as follows: Maturity (months) Rate (% per annum) 8.0 8.2 8.4 12 8.5 15 8.6 18 8.7 Calculate forward interest rates with continuous compounding for the second, third, fourth, fifth, and sixth quarters.2. Assume that spot rates are as in Q1, What is the value of an FHA that enables the holder to earn 9.5% for a 3month period starting in 1 year on a principal of $1,000,000? The 9.5% interest rate is quarterly compounded

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