Question
In: Finance
Assume that a bank can borrow or lend at the rates in the Table below. The...
Assume that a bank can borrow or lend at the rates in the Table below. The interest rate is expressed with quarterly compounding.
Qtr 2 8.4% Qtr 3 8.8% Qtr 4 8.8% Qtr 5 9.0% Qtr 6 9.2%
What is the forward rate with continuous compounding for a three-month period starting in one year on a principal of $1,000,000?
Solutions
Expert Solution
forward rate starting in one year for three month period with quarterly compounding=((1+9%/4)^5/(1+8.8%/4)^4-1)*4=9.801%
rate compounded continuously=ln((1+9.801%/4)^4)=9.682831%
jeff jeffy answered 2 years agoRelated Solutions
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