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Suppose that in order to hedge interest rate risk on your borrowing, you enter into an FRA that will guarantee a 6.9% effective annual interest
Suppose that in order to hedge interest rate risk on your borrowing, you enter into an FRA that will guarantee a 6.9% effective annual interest rate for 1 year on $3,000,000. On the date you borrow the $3,000,000, the actual interest rate is 7.7%. To settle the FRA on the date the loan is repaid, you would...
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