Question
Bankers Trust sells a six against nine $10,000,000 forward rate agreement (FRA) on a 30month (91 days), 5 percent loan, which it funds with a
Bankers Trust sells a "six against nine" $10,000,000 forward rate agreement (FRA) on a 30month (91 days), 5 percent loan, which it funds with a 4.5 percent Eurodollar CD. If the agreement rate is 5 percent and the settlement rate is 4.5 percent then:
Multiple Choice
A.the buyer pays the seller $12,497.
B.the seller pays the buyer $12,639.
C. The seller pays the buyer $12,497.
D. the buyer pays the seller $12,639.
E. No payment is made because the settlement rate and the CD rate are the same.
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
