The yield curve is flat at 6% per annum. What is the value of an FRA where the holder receives interest at the rate of 8% per annum for a six-month period on a principal of $1,000 starting in two years? All rates are compounded semiannually.

$897.11

Explanation:

Interest for six month period =8%/2 =4%=.04.

Given Principal is $1,000.

Given yield curve is 6%. Therefore, semi annual yield =6%/2 =3%.

Interest received for 6 months periods =$1,000 * 4% =$40.

So, the amount that would be received after 2 years and 6 months =$1,000+$40 =$1,040.

To arrive at the value of the forward rate agreement currently, the future value of the FRA needs to be discounted with 3% for a five period interval, because there are five half years to receive the amount of $1,040.

Therefore, present value of FRA =$1,040 /(1+.03)^5

=$897.11

answer; im thinking the correct answer is (7years);

c

explanation:

c because the item on a bank statement is also referred to as an account statement. in addition, it provides the beginning balance, ending balance, statement date, transaction date for each transaction, payee, customer name and address, statement period, the account holder's account number, and the bank's customer service number