Suppose that zero interest rates are per annum with continuous compounding are as follows: Maturity (years) Rate (% per annum) (1, 2.5) (2, 3.0) (3, 3.5) (4, 4.2) (5, 4.7) Calculate 1-year forward interest rates for the second (f1,2), third (f2,3), fourth (f3,4), and fifth (f4,5) years.
Use the rates in the previous part to value an FRA today as the borrower with 5% per annum for the third year on $1 million. (FRA is for the year starting at year 2 and ending at year 3).
Suppose that zero interest rates are per annum with continuous compounding are as follows: Maturity (years)...
Suppose that zero interest rates with continuous compounding are as follows: Maturity (months) 34 62 94 Rate % per annum) 3.02 3.22 3.42 3.5e 3.62 3.72 12e 152 18 Calculate forward interest rates for the second, third, fourth, fifth, and sixth quarters.
maturity(years) rate(% per annum) 1 2.0 2 3.0 3 3.7 4 4.2 5 4.5 Using the rates calculate f1,2, f1,3, f1,4, f1,5, f2,3, f2,4, f2,5, f3,4, f3,5, and f4,5.
maturity(years) rate(% per annum) 1 2.0 2 3.0 3 3.7 4 4.2 5 4.5 Using the rates calculate f1,2, f1,3, f1,4, f1,5, f2,3, f2,4, f2,5, f3,4, f3,5, and f4,5. Annualize all rate
suppose that 0 interest rates with continuous compounding are as follows. calculate forward interest rates for the second third and fourth quarters. month zero rate for an n month investment(%per year) 3 3.0 6 3.2 9 3.4 12 3.5
2. Suppose that zero interest rates with quarterly compounding are as follows: Maturity (months) Rate(%) 3 8.0 6 8.4 9 8.8 12 9.0 i. Calculate the forward interest rates for the second, third, and fourth quarters. ii. You should have found that the forward rate over the fourth quarter is 9.6006%. Carefully explain the available arbitrage strategy and calculate your profit) if you found a bank willing to lend to you forward at 9.0000% over the fourth quarter.
XYZ stock has a share price of $125 today. All rates of interest are 5% per year with continuous compounding. Finally, XYZ is scheduled to pay the following dividends per share over the next year: a dividend of $3.0 per share in three months and a dividend of $3.0 per share in six months. Derive today’s forward price of the stock for delivery in nine months.
XYZ stock has a share price of $125 today. All rates of interest are 5% per year with continuous compounding. Finally, XYZ is scheduled to pay the following dividends per share over the next year: a dividend of $3.0 per share in three months and a dividend of $3.0 per share in six months. Derive today’s forward price of the stock for delivery in nine months.
Exercise 2. The 6-month, 12-month. I 8-month, and 24-month zero rates are 4%, 4.5%, 4.75% and 5%, with continuous compounding (a) What are the rates with semi-annual compounding? (c) Forward rates are rates of interest implied by current zero rates for periods of time in the future. Calculate the forward rate for year 2, i.e. the rate for the period of time between the end of 12-month and the end of 24-month. (d) Consider a 2-year bond providing semiannual coupon...
What is the value of a swap with two years to maturity where SOFR is received and 5% per annum is paid (with semi-annual compounding) every six months on a $1,000,000 notional principal. Assume the OIS rates are 4.1% for all maturities (with continuous compounding).
Problem 1.5 The yield curve is flat at 5% per annum with quarterly compounding. What is the value of a Forward Rate Agreement (FRA) where the holder receives interest at the rate of 5% per annum for one year on a principal of $1,000 starting in one year? Hint: Draw a diagram showing the cash flows exchanged as part of the FRA and its timeline.