Question: Example. Suppose that the semiannually compounded forward LIBOR rate for the period between 1 year and 1.5 years in the future is 4% and that

Example. Suppose that the semiannually compounded forward LIBOR rate for the

Example. Suppose that the semiannually compounded forward LIBOR rate for the period between 1 year and 1.5 years in the future is 4% and that some time ago a company entered into FRA where it will receive 4.7% (with semiannual compounding) on a principal of $100 million for the period. The 1.5-years LIBOR is 2% (with semiannual compounding). From equation (II-6) we find the value of FRA today

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