Suppose that a company enters into a FRA that is designed to ensure it will receive a fixed rate of 4.8% on a principal of $100,000,000 for a six-month period beginning in 4 years. If, in 4 years the six-month LIBOR is 5.2% for the ensuing six-month period, what is the value of the FRA at that point in time (i.e. in 4 years)? (Required precision: 0.01 +/- 0.01) (All interest rates in this problem are annual rates, compounded semi-annually)
Suppose that a company enters into a FRA that is designed to ensure it will receive a fixed rate of 4.8% on a principal of $100,000,000 for a six-month period beginning in 4 years. If, in 4 years the six-month LIBOR is 5.2% for the ensuing six-month period, what is the value of the FRA at that point in time (i.e. in 4 years)? (Required precision: 0.01 +/- 0.01) (All interest rates in this problem are annual rates, compounded semi-annually)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Suppose that a company enters into a FRA that is designed to ensure it will receive a fixed rate of 4.8% on a principal of $100,000,000 for a six-month period beginning in 4 years. If, in 4 years the six-month LIBOR is 5.2% for the ensuing six-month period, what is the value of the FRA at that point in time (i.e. in 4 years)?
(Required precision: 0.01 +/- 0.01)
(All interest rates in this problem are annual rates, compounded semi-annually)
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