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Required: A bank sells a three against six $ 3 , 0 0 0 , 0 0 0 FRA for a three - month period

Required:
A bank sells a "three against six" $3,000,000 FRA for a three-month period beginning three months from today and ending six 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 six-month Eurodollar deposit. The agreement rate with the buyer is 5.50 percent. There are
actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 6.125 percent. Determine
how much the FRA is worth and who pays who-the buyer pays the seller, or the seller pays the buyer.
Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a
year.
Answer is complete but not entirely correct.A bank sells a three against six $3,000,000 FRA for a three-month period beginning three months from today and ending six 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 six-month Eurodollar deposit. The agreement rate with the bRequired:
A "three-against-nine" FRA has an agreement rate of 4.75 percent. You believe six-month CME Term SOFR in three months will be
5.125 percent. You decide to take a speculative position in an FRA with a $1,000,000 notional value. There are 183 days in the FRA
period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the
six-month CME Term SOFR rate.
Note: Round your intermediate calculations to 6 decimal places. Round your answer to 2 decimal places. Assume 360 days in a
year.
Answer is complete but not entirely correct.
Buy FRA
for an expected profit of
$
0.63
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