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Bank runs an FRA book, so it both buys and sells FRAs. It quotes a higher FRA rate to the buyer (borrower) and a lower
Bank runs an FRA book, so it both buys and sells FRAs. It quotes a higher FRA rate to the buyer (borrower) and a lower FRA rate to the seller (investor) and earns the spread.
The bank offers the following FRA quotations:
Bank as seller = 10.50%
Bank as buyerr= 10.10%
What is the return in dollars the bank can make of running the above FRA book under the following terms? ( use 2 decimals)
Nominal value $1,000,000 Term 90 days Reference rate on the settlement date = 10% per annum
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