The following table shows the zero-coupon bond prices per $1 of maturity payment (i.e., the face...
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The following table shows the zero-coupon bond prices per $1 of maturity payment (i.e., the face value is $1) at different maturities. Maturity (in months) 3 6 9 12 15 Zero Coupon Bond Price per $1 of maturity payment 0.961 0.943 0.921 0.894 0.852 (a) Suppose you will receive $1 million 9 months later, and you would like to lend out the money at a fixed rate for 6 months. What should be the fixed effective interest rate for that 6-months period? No need to annualize the interest rate. Please input the answer in percentage without the % sign (e.g. 8.12% as 8.12). (b) You use an FRA to achieve the goal. Suppose 9 months later, the 6-month annualized spot rate is 8%. What is the settlement amount of your FRA position if it is settled in arrears? Please input the answer in dollar (e.g., 8.12 dollars as 8.12). (c) You use an FRA to achieve the goal. Suppose 9 months later, the 6-month annualized spot rate is 8%. What is the settlement amount of your FRA position if it is settled at the start of the lending? Please input the answer in dollar (e.g., 8.12 dollars as 8.12). The following table shows the zero-coupon bond prices per $1 of maturity payment (i.e., the face value is $1) at different maturities. Maturity (in months) 3 6 9 12 15 Zero Coupon Bond Price per $1 of maturity payment 0.961 0.943 0.921 0.894 0.852 (a) Suppose you will receive $1 million 9 months later, and you would like to lend out the money at a fixed rate for 6 months. What should be the fixed effective interest rate for that 6-months period? No need to annualize the interest rate. Please input the answer in percentage without the % sign (e.g. 8.12% as 8.12). (b) You use an FRA to achieve the goal. Suppose 9 months later, the 6-month annualized spot rate is 8%. What is the settlement amount of your FRA position if it is settled in arrears? Please input the answer in dollar (e.g., 8.12 dollars as 8.12). (c) You use an FRA to achieve the goal. Suppose 9 months later, the 6-month annualized spot rate is 8%. What is the settlement amount of your FRA position if it is settled at the start of the lending? Please input the answer in dollar (e.g., 8.12 dollars as 8.12).
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a To find the fixed effective interest rate for a 6month period you need to use the zerocoupon bond ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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