The Treasurer of Company X intends borrowing fixed rate one year from now. The particular loan is
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The Treasurer of Company X intends borrowing fixed rate one year from now. The particular loan is to have a one-year maturity. Unfortunately, interest rates on fixed rate loans could rise before then. The solution could be to negotiate an FRA covering the interim year. The currently quoted two-year fixed rate is 6% and the one-year rate is 7%.
What would be a fair rate of interest on the FRA?
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