Chapter 6

Task 

In this assignment you will solve problems about Interest-Rate Futures, Forwards, and Swaps. 

Instructions 

1. Use your textbook to answer the following questions from Chapter 6:
   1. Exercise 15, 16, 20, and 21. 
2. Please, upload xls, xlsx file.
3. Please, use the full computing power of Excel.

Questions:

 15. If the six-month interest rate is 6% and the one-year interest rate is 8%, what is the rate

for an FRA over the period from six months to one year? Assume that the number of

days up to six months is 182 and from six months to one year is 183.

16. If the three-month (91 days) Libor rate is 4% and the six-month (183 days) rate is 5%,

what should be the 3°ø6 FRA rate? If, at the end of the contract, the three-month Libor

rate turns out to be 5%, what should the settlement amount be?

 20. You enter into an FRA of notional 6 million to borrow on the three-month underlying

Libor rate six months from now and lock in the rate of 6%. At the end of six months, if

the underlying three-month rate is 6.6% over an actual period of 91 days, what is your

payoff given that the payment is made right away? Recall that the ACT/360 convention

applies.

21. You have entered into the 69 FRA of Question 20 at the rate of 6%. After three months,

the FRA is now a 3 °ø 6 FRA. If the three-month Libor rate is 5%, and the six-month

Libor rate is 7%, what is the current value of the FRA? Assume that the number of days

in the first three months is 92.