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Suppose that the 1.5-year and 2-year zero rates with continuous compounding are 4.70% and 4.76%, respectively....

Suppose that the 1.5-year and 2-year zero rates with continuous compounding are 4.70% and 4.76%, respectively. (a) What is the forward rate for the six-month period beginning in 18 months (1.5R2) (from Year 1.5 to Year 2) with continuous compounding?

(b) What is the forward rate for the six-month period beginning in 18 months (1.5R2) (from Year 1.5 to Year 2) with semiannual compounding?

(c) What is the (Year 0) value of an FRA that promises to pay you 6% (compounded semiannually) on a principal of $1 million for the six-month period starting in 18 months (from Year 1.5 to Year 2)?

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ekkarill92 answered 2 years ago
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