Question: Solve problem 2 please! Problem 1. The current spot interest rates with continuous compounding are as follows: Q_uarter W 1 3 2 6 3 9

Solve problem 2 please!

Problem 1. The current spot interest rates with continuous compounding are as follows: Q_uarter W 1 3 2 6 3 9 4 12 5 15 6 18 8.0 8.2 8.4 8.5 8.6 8.7 [25 points] Find the corresponding continuously compounded annual forward rates for the quarters 2 - 6. Problem 2. [25 points] Assume the continuously compounded spot rates of Problem 1. Find the value of an FRA that enables the holder to pay a xed rate of 9.5%, compounded quarterly, for one quarter starting in 1 year and ending in 15 months, and receive oating rates, on a principal of $2,000,000

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