On May 15, 2000, you enter into a 1-year forward rate agreement (FRA) with a bank for the period starting November 15, 2000, to May 15, 2001. You will receive the forward rate and pay the floating rate in the FRA. You know that currently the price of the 6-month zero coupons is $96.79 and the price of the 1-year zero coupons is $93.51.

(a) What is the agreed-upon forward rate in the transaction?

(b) What is the value of the FRA at inception?

Answer rating: 100% (QA)

Since we have the price of Zero Coupon Bonds we need to find the YTM of both the bonds We need to us... View the full answer