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QUESTION 2 Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) Rate(% per annum) 6 6 12 6,2 18 6.4 24

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QUESTION 2 Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) Rate(% per annum) 6 6 12 6,2 18 6.4 24 6.6 There is an FRA that enables the holder to earn 7.2% (with semiannual compounding for a 6 month period starting in one year on a principal of $1 million What is the value of the FRA

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