Question
Suppose the 4-month and 10-month LIBOR spot rates are 4.4% and 4.56%, respectively (continuously compounded rates). An investor enters into an FRA in which she
Suppose the 4-month and 10-month LIBOR spot rates are 4.4% and 4.56%, respectively (continuously compounded rates). An investor enters into an FRA in which she will receive 5.1% (assuming semiannual compounding) on a principal of $8,000,000 between months 4 and 10. What is the payoff of the FRA at 10 months?
A.$16,030
B.$15,139
C.$17,333
D.$16,667
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Quantitative Investment Analysis
Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle
3rd edition
111910422X, 978-1119104544, 1119104548, 978-1119104223
