The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a...
The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a homemade forward forward could earn what annualized interest rate on a 3-month $1,000,000 deposit made in 9 months?
Note: I think the answer is 4.85%, but I am not 100% sure. Please show work and calculations.
Homework Answers
Rate for homemade forward for 3 months deposit made after 9 months = [(1+ i12month) / (1+i9month x 9/12) -1] x 12/3
Rate for homemade forward for 3 months deposit made after 9 months = [(1+ 5%) / (1+4%x9/12) -1] x 12/3
Rate for homemade forward for 3 months deposit made after 9 months = 7.77% p.a.
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The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An
investor creating a...
The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a...
The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a homemade forward forward could earn what annualized interest rate on a 3-month $1,000,000 deposit made in 9 months? I'm pretty confident it is: 1,000,000 / 1 + .04 (3/4) = $970,874 $970,874 x (1 + .05 (4/4)) = $1,019,418 then this is where I'm unsure... is it: $1,019,418 - $970,874 = $48,544 $48,544 / $1,000,000 = .0485 = 4.85% Please show work if this...
The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a...
The 9-month Libor rate is 4%. The 12-month Libor rate is 5%. An investor creating a homemade forward forward could earn what annualized interest rate on a 3-month $1,000,000 deposit made in 9 months? I'm pretty confident it is: 1,000,000 / 1 + .04 (3/4) = $970,874 $970,874 x (1 + .05 (4/4)) = $1,019,418 then this is where I'm unsure... is it: $1,019,418 - $970,874 = $48,544 $48,544 / $1,000,000 = .0485 = 4.85% Please show work if this...
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