Business, 24.09.2019 05:00 trillsmith

4. you enter into a five-to-eight-month forward rate agreement with a
firm. you agree to lend the firm a 3-month loan of $5 million starting 5
months from now, with a quarterly compounded forward interest rate of
2.5% per annum. currently, the continuously compounded 5-month and
8-month interest rates are 3% per annum and 3.5% per annum,
respectively.
1) what is the implied forward rate for the 3-month period starting 5
months from now?
2) what is the present value of this forward rate agreement to you now?

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4. you enter into a five-to-eight-month forward rate agreement with a
firm. you agree to lend t...

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