A forward rate agreement (FRA) exchanges a fixed 4.5% interest (quarterly compounded) for 3 months starting...
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A forward rate agreement (FRA) exchanges a fixed 4.5% interest (quarterly compounded) for 3 months starting in 0.5 years on a principal of $200 million with a floating rate tied to the rates observed below. Consider the following annual interest rates: Maturity (years) 0.25 0.5 0.75 1 Risk-free spot rate (with continous compounding) 0.039 0.04 0.046 0.049 3-month forward rate (with quarterly compounding) 0.0412 0.0584 0.0584 Attempt 1/4 for 10 pts. Part 1 What is the value of the FRA to the receiver of the 4.5% (in $) (pays the floating rate)? A forward rate agreement (FRA) exchanges a fixed 4.5% interest (quarterly compounded) for 3 months starting in 0.5 years on a principal of $200 million with a floating rate tied to the rates observed below. Consider the following annual interest rates: Maturity (years) 0.25 0.5 0.75 1 Risk-free spot rate (with continous compounding) 0.039 0.04 0.046 0.049 3-month forward rate (with quarterly compounding) 0.0412 0.0584 0.0584 Attempt 1/4 for 10 pts. Part 1 What is the value of the FRA to the receiver of the 4.5% (in $) (pays the floating rate)?
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Related Book For
Multinational Business Finance
ISBN: 978-0133879872
14th edition
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
Posted Date:
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