QUESTION 1 Use the following LIBOR-zero rates to find an appropriate forward rates: period (years) LIBOR-zero (cont.comp) forward rate for the nth year (cont.comp) 0.5 4.04% 1 ? 3.05% 3.50% 1.5 ? Questions 1) Find the forward rate for year 1st year and for the 1.5th year, respectively. 2) Find the value of the FRA where you will receive 9% (with semi-annual compounding) on a principal of $100 million for 6 months, which the FRA term starts in year 1 and end in year 1.5. *hint: you would need to convert the appropriate forward rate with continuous compounding from question #1 into a semi-annual compounding rate first. 3) 1 year later, if the 6 month LIBOR turns out to be 5% with semi-annual compounding, how much do you need to pay or receive at 1 year point? QUESTION 1 Use the following LIBOR-zero rates to find an appropriate forward rates: period (years) LIBOR-zero (cont.comp) forward rate for the nth year (cont.comp) 0.5 4.04% 1 ? 3.05% 3.50% 1.5 ? Questions 1) Find the forward rate for year 1st year and for the 1.5th year, respectively. 2) Find the value of the FRA where you will receive 9% (with semi-annual compounding) on a principal of $100 million for 6 months, which the FRA term starts in year 1 and end in year 1.5. *hint: you would need to convert the appropriate forward rate with continuous compounding from question #1 into a semi-annual compounding rate first. 3) 1 year later, if the 6 month LIBOR turns out to be 5% with semi-annual compounding, how much do you need to pay or receive at 1 year point