Problem 4.5:

Problem 4.6:

Assuming that risk-free zero rates are as in Problem 4.5, what is the value of an FRA where the holder will pay LIBOR and receive 4.5% (quarterly compounded) for a three month period starting in one year on a principal of $1,000,000? The forward LIBOR rate for the three-month period is 5% (quarterly compounded)

5. Suppose that risk-free zero interest rates with continuous compounding are as follows: Maturity (months) Rate % per annum) 3.0 3.2 3.4