Assuming that zero rates are as in Problem, what is the value of an FRA that enables the holder to earn 9.5% for a 3-month period starting in 1 year on a principal of $1,000,000? The interest rate is expressed with quarterly compounding.
Problem:
Suppose that zero interest rates with continuous compounding are as follows:
Calculate forward interest rates for the second, third, fourth, fifth, and sixth quarters.