I calculated the continuously compounded forward rate in part (i) of the question. The ActEd solution to part (i) calculates the annually compounded forward rate. ~ Does this have to do with the fact that the frequency of compounding has to match the frequency of payment in the FRA? ~ I know this was mentioned some where in the course notes but I cannot seem to find it now. Could someone please point me to this part of the notes? Thanks!!
FRAs Hi the rate of interest has to tie up with the FRA period. So for example, if the FRA is a half year period, then the rate has to be an annual rate compounding twice per annum. (in other words i(2) )
