The 6-month, 12-month. 18-month and 24-month zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual compounding.
Question:
a) What are the rates with continuous compounding?
b) What is the forward rate for the six-month period beginning in 18 months
c) What is the value of an FRA that promises to pay you 6% (compounded semiannually) on a principal of $1 million for the six-month period starting in 18 months?
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a With continuous compounding the 6month rate is or 3961 The 12month rate is or 44501 ...View the full answer
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