1) 6 month, 12 month, 18 month, and 24 month interest rates are 3.00%, 3.50%, 4.00%, and 4.00% with semi-annual compounding.
i) Find out the number of periods per year (m) with semi-annual compounding?
ii) Determine equivalent 6 month, 12 month, 18 month, 24 month interest rates with continuous compounding?
iii) Compute forward rate for six month period beginning in 12 months (that is, F1,1.5)? Report the forward rate in both with continuous compounding and with semi-annual compounding.
iv) Determine the value of the FRA, where you pay fixed rate= 4.50% (with semi-annual compounding) on the principal of $1 million for the 6 month period starting in 12 months?
Requirements:
Min Pages: 1