Consider a 6×12 FRA Where the Underlying Six-Month Period Is

Multiple Choice

Consider a 6×12 FRA where the underlying six-month period is 183 days and the notional is $100. The FRA fixed rate is 5%. At maturity of the contract the underlying Libor for six months is 7%. What is the settlement amount on the FRA? Assume the Actual/360 convention.

A) 0.9683
B) 0.9687
C) 0.9817
D) 1.0167