Question: Problem 4 . 6 . Assuming that risk - free rates for 1 5 months are 3 . 6 % , what is the value

Problem 4.6.Assuming that risk-free rates for 15 months are 3.6%, what is the value of an FRA where theholder will pay LIBOR and receive 4.5%(quarterly compounded) for a three-month periodstarting in one year on a principal of $1,000,000. The forward LIBOR rate for the three-monthperiod is 5% quarterly compounded.

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