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On September 4, a firm buys a 2x5 FRA but on October 4 they realize that there is no need for the FRA and wants
On September 4, a firm buys a 2x5 FRA but on October 4 they realize that there is no need for the FRA and wants to offset its obligation. The initial FRA was entered at 5.45% on a principal of *12.5 mn. The firm's treasurer receives the following quotes: 2x5 2x4 Ix4 Ix5 2x6 5.15 4.85 5.65 5.83 6.02 If the firm intends to set-off the initial FRA, which one from the above table should be chosen? what will be the cash flow consequences? On September 4, a firm buys a 2x5 FRA but on October 4 they realize that there is no need for the FRA and wants to offset its obligation. The initial FRA was entered at 5.45% on a principal of *12.5 mn. The firm's treasurer receives the following quotes: 2x5 2x4 Ix4 Ix5 2x6 5.15 4.85 5.65 5.83 6.02 If the firm intends to set-off the initial FRA, which one from the above table should be chosen? what will be the cash flow consequences
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