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Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) 3 6 9 12 15 18 Rate (% per annum) 8.0 8.2

Suppose that zero interest rates with continuous compounding are as follows:

Maturity (months) 3 6 9 12 15 18

Rate (% per annum) 8.0 8.2 8.4 8.5 8.6 8.7

Assume that a bank can borrow or lend at the rates above. What is the value of an FRA where it will earn 9.1% (per annum with quarterly compounding) for a three-month period starting in fifteen months on a principal of $2,000,000?

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