Suppose that zero intrest rates with continuous compounding, Ask an Expert

Finance

Suppose that zero intrest rates with continuous compounding are as follows:

Maturity Rate

6 6

12 6.2

18 6.4

24 6.6

A) What is the forward rate for the 6-month period starting in one year?

B) What is the forward rate with semiannual compounding?

C) There is an FRA that enables the holder to earn 7.2% (with semiannual compounding) for a 6-month period starting in one year on principal of $1 million.

What is the value of the FRA?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92874096

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