Question
A three-against-nine FRA has an agreement rate of 4.75 percent.You believe six-month LIBORin three months will be 5.125 percent.You decide to take a speculative position
A "three-against-nine" FRA has an agreement rate of 4.75 percent.You believe six-month LIBORin three months will be 5.125 percent.You decide to take a speculative position in a FRA with a $1,000,000 notional value.There are 183 days in the FRA period.
5.1. Should you buy or sell the FRA?
5.2. What is your expected profit if your forecast is correct about the six-month LIBOR rate?
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Fundamentals of Investments, Valuation and Management
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
8th edition
1259720697, 1259720691, 1260109437, 9781260109436, 978-1259720697
