Question: Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) Rate (% per annum) 3 9.0 6 9.2 9 9.4 12 9.5

Suppose that zero interest rates with continuous compounding are as follows:

Maturity (months) Rate (% per annum) 3 9.0 6 9.2 9 9.4 12 9.5 15 9.6 18 9.7

Assume that a bank can borrow or lend at the rates above. What is the value of an FRA where it will earn 9.5% (per annum with quarterly compounding) for a three-month period starting in six months on a principal of $3,000,000?

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