You Wish to Create a Synthetic Forward Rate Agreement in Which

question 17

Multiple Choice

You wish to create a synthetic forward rate agreement in which you would lock in a return between 150 and 310 days.The price of a 150-day zero coupon bond is 0.9823 and the price of 310-day zero coupon bond is 0.9634.What is the approximate yield on the synthetic FRA?

• A) 1.8%
• B) 2.0%
• C) 2.9%
• D) 3.8%

---

Definitions:

X-axis

The horizontal axis in a coordinate system, typically used to represent the independent variable in a graph.

Median

The middle value in a sorted list of numbers, effectively dividing the dataset into two halves.

Normally Distributed

Describes a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence.

Gasoline Prices

The economic measure tracking the cost at which gasoline is sold to consumers, often subject to changes based on oil market dynamics, geopolitical factors, and regulatory policies.