The 6-month, 12-month, 18-month, and 24-month
The 6-month, 12-month, 18-month, and 24-month zero rates are 2.50%, 3.00%, 3.50%, and4.00% with semi-annual compounding.Q1: What are the equivalent rates with continuous compounding?Q2: What is the forward rate for the six-month period beginning in 12 months (i.e., F12,18)? Ifyou use Eq 4.5 or 4.6, convert the forward rate into semi-annual compounding rate.Q3: What is the value of an FRA that pays you the forward rate in Q2 and you pay a fixed rateof 4.25% (compounded semi-annually) on a principal of $1 million for the six-month periodstarting in 12 months?
