Suppose that the risk-free rates are as in Problem 4.28. What is the value of an FRA where the holder pays LIBOR and receives 7% (semiannually compounded) for a six-month period beginning in 18 months. The current forward LIBOR rate for the period is 6% (semiannually compounded).
(Based on Problem 4.28.
The 6-month, 12-month. 18-month,and 24-month risk-free zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual compounding.
What are the rates with continuous compounding?
What is the forward rate for the six-month period beginning in 18 months
What is two-year par yield)