On May 15, 2000 you enter into a 1-year forward rate agreement (FRA) with a bank for the period starting November 15, 2000 to May 15, 2001. You know that currently the price of the 6-month zero coupon is $98.55 and the price of the 1-year zero coupon is $96.94. Three months later(August 15, 2000) you have second thoughts and consider that maybe you should get out of the transaction. You receive the data in the first two columns of Table 3.

Table 5.9 Two Discount Curves August 15, 2000 Maturity 2(0,7) November 15, 2000 Maturity Z(0,7) 0.25 0.50 0.75 1.00 0.9844 0.9690 0.9531 0.9386 0.25 0.50 0.75 1.00 0.9848 0.9692 0.9545 0.9402 Source: Bloomberg Table 5.9 Two Discount Curves August 15, 2000 Maturity 2(0,7) November 15, 2000 Maturity Z(0,7) 0.25 0.50 0.75 1.00 0.9844 0.9690 0.9531 0.9386 0.25 0.50 0.75 1.00 0.9848 0.9692 0.9545 0.9402 Source: Bloomberg