Question $37$

$2\mathrm{.}5$ pts

A bank sells a "three against nine" $$5,000,000$ FRA for a six$-$month period beginning three months from today and ending nine months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three$-$month Eurodollar loan and having accepted a nine$-$month Eurodollar deposit. The agreement rate with the buyer is $5\mathrm{.}3$ percent. There are actually $183$ days in the six$-$month period. Assume that three months from today the settlement rate is $\frac{41}{8}$ percent. Determine the payoff for the buyer.

HINT: If the buyer needs to pay the seller, the payoff amount would be negative. If the seller needs to pay the buyer, the payoff amount would be positive.

$-$$$29,251\mathrm{.}22$

$$30,650\mathrm{.}53$

$-$$$45,234\mathrm{.}56$

$$117,316\mathrm{.}07$

Question $38$

$2\mathrm{.}5$ pts

Same facts as above: how would your solution change if the settlement rate in problem $2$ is $6\frac{1}{2}$ percent? What would be the payoff for the buyer now?

HINT: If the buyer needs to pay the seller, the payoff amount would be negative. If the seller needs to pay the buyer, the payoff amount would be positive.

$$30,500\mathrm{.}00$

$$41,245\mathrm{.}67$

$-$$$30,500\mathrm{.}00$

$$29,524\mathrm{.}46$