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6) Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) 3 9 12 15 18 Rate(% per annum) 5.0 5.2 5.4

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6) Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) 3 9 12 15 18 Rate(% per annum) 5.0 5.2 5.4 S.S 5.6 5.7 Assume that a bank can borrow or lend at the rates above. What is the value of an FRA where it will cam 5.7% (per annum with quarterly compounding for a three-month period starting in twelve months on a principal of S1,750,000

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