Atlantic Brands Limited has established a $10 million 90-day bank bill rollover facility with BankWest. The company is concerned that interest rates may rise at the next rollover date. The company decides to manage this risk exposure with a forward rate agreement (FRA) with BankWest. The bank gives the following quote: 3Mv6M(21) 6.1505. The reference rate is the Australian BBSW. Note: At the first rollover date BBSW is published as 6.10 per cent per annum.

(a) Explain each of the components of the above FRA quote.

(b) Distinguish between a futures contact and a FRA as risk management tools.