Question: Question 5 (10 points) Given that the following Zero rate with semiannual compounding:- Maturity (years) Zero rate(semi-annual) Zero rate (c.c.) 0.52 52 4.94 1.04 5.252

Question 5 (10 points) Given that the following Zero rate with

Question 5 (10 points) Given that the following Zero rate with semiannual compounding:- Maturity (years) Zero rate(semi-annual) Zero rate (c.c.) 0.52 52 4.94 1.04 5.252 5.182 1.52 5.52 5.432 2.02 6 5.914 (a) What are the rates with continuous compounding? (2 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 $1million for the 6-month started in 1.5 years? (4 points)

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