A forward rate agreement (FRA) will pay a company 5% interest (with semi-annual compounding) on a principal of $60 million for six months starting in 12 months. If the forward rate for the six-month period is 4% (with semi-annual compounding), what is the value to the company of this FRA? Assume that the 18-month zero rate is 3% per annum (with continuous compounding). Round the answer to the nearest hundredth.

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The FRA pays Interest after 18 months 60 million 52 ... View the full answer