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Determine the value of a FRA. Use the following forward rates to determine the value of a FRA that promises to pay you 6% (compounded
Determine the value of a FRA.
Use the following forward rates to determine the value of a FRA that promises to pay you 6% (compounded semi-annually) on a principal of $1 million for a 6-month period starting in 18 months from now. Note, the subscripts refer to months, so f_6 x 12 is the 6-month spot rate that commences six months from now. All rates are semi-annual APRS.
Period | Rate |
LIBOR_0x6 | 4.00% |
f_6x12 | 4.50% |
f_12x18 | 4.75% |
f_18x24 | 5.00% |
f_24x30 | 5.25% |
f_30x36 | 5.50% |
The answer is apparently positive $5710.82, but I am not getting anywhere close to this. Could use some help.
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