Question: Suppose you want to detemine the forward rates for your client, a lender who is considering a Forward Rate Ageement ( FRA). You have collected
Suppose you want to detemine the forward rates for your client, a lender who is considering a Forward Rate Ageement ( FRA). You have collected and organized the data for the risk-free zero interest rates with continuous compounding in the following table:
Maturity( years) | Zero Rate (% per annum) |
1 | 2 |
2 | 3 |
3 | 4 |
4 | 6 |
5 | 7 |
What is the forward rate for the third year?
What is the forward rate for the fourth year?
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