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28 Sep 2019
Suppose a company enters into an FRA that specified it will receive a fixed rate of 5% on a principal of $1 million for 6-month period starting 1.5 year. Some bond information is shown in the following table:
Principal Maturity Annual coupon* Bond Price ($)
100 0.5 0 95.0
100 1.0 6 92.0
100 1.5 8 97.0
100 2.0 12 102.0
Half the stated coupon is assumed to be paid every 6 months. Can you help to evaluate the value of this FRA contract?
Suppose a company enters into an FRA that specified it will receive a fixed rate of 5% on a principal of $1 million for 6-month period starting 1.5 year. Some bond information is shown in the following table:
Principal Maturity Annual coupon* Bond Price ($)
100 0.5 0 95.0
100 1.0 6 92.0
100 1.5 8 97.0
100 2.0 12 102.0
Half the stated coupon is assumed to be paid every 6 months. Can you help to evaluate the value of this FRA contract?
Hubert KochLv2
28 Sep 2019