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Suppose that the zero rates with continuous compounding (per annum) for different maturities in the market are given as: 3-month = 7.6%, 6-month = 7.8%,
Suppose that the zero rates with continuous compounding (per annum) for different maturities in the market are given as: 3-month = 7.6%, 6-month = 7.8%, 9-month = 8.0%, 12-month = 8.1%, 15-month = 8.2%, 18-month = 8.4%. Assume that a bank can borrow or lend at the zero rates in the market. What is the value of an FRA where it will earn 9.0% for a three-month period starting in one year on a principal of 1,000,000? The interest rate is expressed with quarterly compounding.
Select one:
a. 692.47
b. 902.58
c. 691.93
d. 901.0
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