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What happens to the continuously compounded forward rate
Course:- Financial Management
Reference No.:- EM131325530





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Assume the 30-day LIBOR is 5 percent and the 120-day LIBOR is 6 percent. This implies a continuously compounded 90-day forward rate of 6.3448 percent.

Verify this result and explain what happens to the continuously compounded forward rate as the number of days in the forward contract increases and the more distant spot rate remains at 6 percent.




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