1. Suppose the semiannually compounded twelve-month and eighteen-month spot rates are observed as 18% and 20%, respectively. Calculate the value today of a six-month forward rate agreement in which you will receive a fixed rate of 22% compounded semiannually over a six-month period that begins one year from today and pay the then prevailing six-month spot rate on a notional principal of £1,0000,000.
