4 Interest Rates Problem 4.1. The 6-month, 12-month. 18-month, and 24-month risk-free zero rates are 3%, 3.4%, 3.7%, and 4% with semiannual compounding. (a) What are the rates with continuous compounding? (b) What is the forward rate for the six-month period beginning in 18 months? (c) What is two-year par yield? (d) What is the value of an FRA where the holder pays LIBOR and receives 6% (semi- annually compounded) for a six-month period beginning in 18 months? The current forward LIBOR rate for the period is 5% (semiannually compounded)