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The 6 month, 12 month, 18 month, and 24 month inte...

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Question

The 6 month, 12 month, 18 month, and 24 month interest rates are 3.00%, 3.50%, 4.00%, and 4.00% with semiannual compounding. Q1: What is the number of periods per year (m) with semiannual compounding? Q2: What are the equivalent 6 month, 12 month, 18 month, 24 month interest rates with continuous compounding? Q3: What is the forward rate for the six month period beginning in 12 months (i.e., F1,1.5)? Report the forward rate in both with continuous compounding and with semiannual compounding. Q4: What is the value of an FRA, where you pay a fixed rate of 4.50% (with semiannual compounding) on a principal of $1 million for the sixmonth period starting in 12 months?

 

Paper#13636 | Written in 18-Jul-2015

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