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4. Let R be the one-year LIBOR rate with annual compounding that will be determined in 6 years from now. Assume the forward interest rate

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4. Let R be the one-year LIBOR rate with annual compounding that will be determined in 6 years from now. Assume the forward interest rate volatility for the corresponding period is 20% per year. The risk-free rates with annual compounding are currently 5% for all maturities. a. Calculate the price of a financial derivative that pays 1000R in 6 years from now. b. Calculate the price of a financial derivative that pays 1000R in 7 years from now. 4. Let R be the one-year LIBOR rate with annual compounding that will be determined in 6 years from now. Assume the forward interest rate volatility for the corresponding period is 20% per year. The risk-free rates with annual compounding are currently 5% for all maturities. a. Calculate the price of a financial derivative that pays 1000R in 6 years from now. b. Calculate the price of a financial derivative that pays 1000R in 7 years from now

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