Multiple Choice
You entered in to a 3 × 6 forward rate agreement that obliged you to borrow $10,000,000 at 3 percent.Suppose at the maturity of the FRA,the correct interest rate is 3.5 percent.Clearly you are better off since you have the ability to borrow $10,000,000 for 3 months at 3 percent instead of 3.5 percent.What is the payoff at the maturity of the FRA?
A) Net payment of $12,391.57 to you
B) Net payment of $12,500 to you
C) Net payment of $50,000 to you
D) Net payment of $48,309.18 to you
Correct Answer:
Verified
Correct Answer:
Verified
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