Question: Given that the following Zero rate with semiannual compounding: Maturity (years) Zero rate(semi-annual) 0.5 1.0 5 5.25 1.5 2.0 5.5 6 (a) What are

Given that the following Zero rate with semiannual compounding: Maturity (years) Zero

Given that the following Zero rate with semiannual compounding: Maturity (years) Zero rate(semi-annual) 0.5 1.0 5 5.25 1.5 2.0 5.5 6 (a) What are the rates with continuous compounding? (8 points) (b) What is the forward rate expressed with continuous compounding and semi-annual compounding for the 6- month period beginning in 1.5 years? (4 points) (c) What is the value of an FRA that promises to pay 7% (compounded semi-annually) on a principal of $1 million for the 6-month started in 1.5 years? (8 points)

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