Business, 12.10.2020 01:01 gamerella101
4. You enter into a five-to-eight-month forward rate agreement with a
firm. You agree to lend the firm a 3-month loan of $5 million starting 5
months from now, with a quarterly compounded forward interest rate of
2.5% per annum. Currently, the continuously compounded 5-month and
8-month interest rates are 3% per annum and 3.5% per annum,
respectively.
1) What is the implied forward rate for the 3-month period starting 5
months from now?
2) What is the present value of this forward rate agreement to you now?
Answers: 3
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4. You enter into a five-to-eight-month forward rate agreement with a
firm. You agree to lend the f...
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