You know that in seven months’ time your company is going to borrow $5 million for six months.
Posted: January 10th, 2022
You know that in seven months’ time your company is going to borrow $5 million for six months. You obtain the following quotes from an FRA dealer: 6Mv7M(23) 10.35 to 25 7Mv13M(23) 10.50 to 20 You enter into an FRA with the dealer:
(a) What will be the FRA agreed rate?
(b) If the reference rate on the settlement date is 9.75 per cent per annum, what is the compensation amount?
(c) Which party to the FRA will make the compensation payment? (LO 19.7)
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