Question
You have done some research and believe the 3-month forward rate is about to increase from 5% to 6% in the future. The FRA are
You have done some research and believe the 3-month forward rate is about to increase from 5% to 6% in the future. The FRA are contracts based on forward rates. Assuming your information is accurate how could you position yourself to profit?
A. Purchase FRAs now and sell them when the FRA price increases before the expiration.
B. Sell the FRA and buy the FRA back before the interest rates increase to profit.
C. Sell the FRA and sell the FRA back before the interest rates increase to profit.
D. Purchase FRAs now and sell it when the FRA prices decrease before the expiration.
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