Assuming that zero rates are as in Problem 4.5, what is the value of an FRA that

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Assuming that zero rates are as in Problem 4.5, 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.


Data from Problem 4-5

Suppose that zero interest rates with continuous compounding are as follows:

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Calculate forward interest rates for the second, third, fourth, fifth, and sixth quarters.

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