Question: The risk-free interest rate is the same as the data in Problem 4.5. What is the value of the FRA that begins after a year

The risk-free interest rate is the same as the data in Problem 4.5. What is the value of the FRA that begins after a year when it pays LIBOR for three months on a principal of 1,000,000 months of holders and receives a 4.5% (quarterly compounded) interest rate? The forward LIBOR interest rate for three months is 5% (quarter compounded).

Problem 4.5: i. Suppose that risk-free zero interest rates with continuous compounding

Problem 4.5: i. Suppose that risk-free zero interest rates with continuous compounding are as follows: Maturity (months) 3 6 9 12 15 18 Rate (% per annum) 3.0 3.2 3.4 3.5 3.6 3.7

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