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1) Does answer for forward rate is wrong ? I calculate using the same method but arrived at 151.55.
The examiners answer of 145.23 for the forward rate is correct.
If you type out your workings I will then be able to tell you where you have gone wrong.
What you are doing wrong is this:
For an annual rate of 8.75%, the 4 monthly rate is 8.75 x 4/12 = 2.917%
So the numerator is 1.02917 (and not 1.0875 x 4/12 as you have written)
The same applies to the 1.9%
(It is the same rule, for the same reason, as I explain in my free lectures on money market hedging).
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