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A six-against-nine FRA has an agreement rate of 2.475 % p.a.. You believe three-month LIBOR in six months will be 3.25 % p.a.. The current
A six-against-nine FRA has an agreement rate of 2.475 % p.a..
You believe three-month LIBOR in six months will be 3.25 % p.a..
The current interest rates for a six-month and a nine-month instruments are 2.15 % p.a. and 3.95 % p.a..
You decide to take a speculative position in a FRA with a $1,000,000 notional value.
Assume there are 30 days in a month.
Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct. Round your answer to the nearest interger
When would you make a loss on the FRA?
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