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What are the rates with continuous compounding

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The 6-month, 12-month. 18-month, and 24-month zero rates are 4%, 4.5%, 4.75%, and 5% with semiannual compounding.

(a) What are the rates with continuous compounding?

(b) What is the forward rate for the six-month period beginning in 18 months?

(c) What is the two-year par yield?

(d) What is the value of an FRA where the holder pays LIBOR (or a replacement rate like SOFR) and receives 7% (semiannually compounded) for a 6-month period beginning in 18 months. The current forward rate for this period is 6% (semiannually compounded). The principal is $10 million.

Reference no: EM133069812

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