The one-year zero rate is 20 and the two-year zero rate is, Ask an Expert

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The one-year zero rate is 2.0%, and the two-year zero rate is 2.5%, both per annum with continuous compounding. What is the value of an FRA (forward rate agreement) that will pay the holder 4.0%, compounded annually, for the second year on a principal of $100 million?

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