Question
A bank sells a three against six $3,000,000 FRA for a three month period beginning three months from today and ending six months from
A bank sells a "three against six $3,000,000 FRA for a three month period beginning three months from today and ending six months from today The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from hoving made a three-month Eurodollar loan and having accepted a six-month Eurodollar deposit. The agreement rate with the buyer is 5.68 percent. There are actually 92 days in the three-month FRA period Assume that three months from today the settlement rate is 4.965 percent. Determine how much the FRA is worth end who pays who-the buyer pays the soller or the seller pays the buyer. (Do not round intermediate calculations. Round your answer to 2 decimal places.) the absolute vue of the FRA Buyer pays seller Seller pays buyer
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