User Account

All Pages

What is the forward rate for the 4th year

Assignment Help Finance Basics
Reference no: EM132799681

Suppose a lender enters into an FRA, where the lender will receive 9%, measured with annual compounding, for the fourth year and pay LIBOR on a principal of $15,260. The forward LIBOR rate (annually compounded) for the fourth year is 9.5%. Suppose that risk-free zero interest rates with continuous compounding are as follows:

Maturity( years) Rate (% per annum)

1 2
2 3
3 4
4 6
5 7

What is the forward rate for the 4th year? (sample answer: 2.50%)

What is the cash flow to the lender at the end of the term(at T=4)? (sample answer: $25.50 or -$25.50)

What is the Value of the FRA to the lender (at T=0)? (sample answer: $25.50 or -$25.50)

Reference no: EM132799681

Questions Cloud

Prepare ego integrity presentation using given details : Based on what you have learned so far in this course, create a PowerPoint presentation that addresses each of the following points/questions.
Highlight the history or background of the key issues : For your final project, you are to choose from one of the topics below that we discuss in this course.
Define three different kinds of power : Define three different kinds of power, and describe how power affects the relationships between people of different disciplines (e.g., between staff in nursing)
Have you ever been involved in union organizing : Have you ever been involved in union organizing, collective bargaining, or worked in a union shop? If so, share your experience.
What is the forward rate for the 4th year : Suppose a lender enters into an FRA, where the lender will receive 9%, measured with annual compounding
Break-even analysis in the event : The benefits of a project are $40,000 at the beginning of the project with increasing benefits of $10,000 a year for the next five years (year 1 = $50,000
Describe the evidence-based change : Locate an article from a peer-reviewed nursing journal where a practice change was made based on research, preferably a change that could relate to your area.
What are the goals of monetary policy : What are the goals of monetary policy? Develop in particular the interest-rate stability goal.
How would you characterize De la Vega style as a follower : How would you characterize De la Vega's style as a follower? What tactics might help improve his relationship with Bussard? Explain

Reviews

Write a Review

Finance Basics Questions & Answers

  Explain the difference between the annual percentage rate

How would you explain the difference between the annual percentage rate (APR) and effective annual rate (EAR) to a friend with no background in finance?

  Question regarding the financial management tools

Assume that you own a Deluxe Spa Salon business that is so successful, you need to open a second location. How will you determine whether or not this is a good idea?  In other words, what financial management tools do you have at you..

  Structural changes in the commercial banking industry

Explain how financial innovation led to the growth of the shadow banking system.

  Evaluate the project using methods

Your retail management company is considering undertaking a project to expand an existing product line. The required rate of return on the project

  Define the different way of transfer of suppliers of capital

Define the different way of transfer of suppliers of capital, describe the different methods of transfer of suppliers of capital to demanding capital

  Optimal portfolio weight to invest in the risky asset

What is their optimal portfolio weight to invest in the risky asset? Enter your answer rounded to two decimal places.

  Mean-variance utility preferences

Assume investors have mean-variance utility preferences

  Calculate the average rate of return for each stock

Stocks A and B have the following historical returns: a. Calculate the average rate of return for each stock during the 5-year period. b. Assume that someone held a portfolio consisting of 50 percent of Stock A and 50 percent of Stock B. What would h..

  What is the capital budgeting and what role does it play in

What is the capital budgeting, and what role does it play in long-term investment decisions? What are the basic capital budgeting models, and which ones are considered the most reliable and why? What is net present value (NPV), how is it calculated, ..

  What is the dividend yield of the stock

If a stock you buy is $50 per share and pays $2 per year in total dividends; what is the dividend yield of the stock?

  What is the beta of the stock

?Suppose the covariance between the returns of the stock GHI and the returns to the market is 0.00080 and the standard deviation of market returns is 0.021.

  Compute a 1-day value at risk for a bond investment

Compute a 1-day Value at Risk for a bond investment portfolio of K10 million in a long position assuming a 95% confidence interval if the actual daily

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd