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NEW QUESTION: 1
Calculate the settlement amount for a buyer of a 3 x 6 FRA with a notional of $1m and contract rate of 5%.
Assume settlement rate is 6%.
A. Receive $2463
B. Pay $2463
C. Receive $9434
D. Pay $9434
Answer: A
Explanation:
Explanation
An m x n FRA is an agreement to borrow money for a period starting at time m and ending at time n at the contracted rate. Therefore, the buyer of the 3 x 6 FRA has committed to borrow $1m at the beginning of 3 months and return it at the end of 6 months, ie a total borrowing period of 3 months at a rate of 5%. Of course, the $1m is never actually exchanged, and at the beginning of the 3 month period when the next three months' interest rate is known (6%), the parties merely exchange the difference in the interest. SInce this interest was only due at the end of the 6 months and is being exchanged at the 3 month time point, it will have to be discounted to its present value.
The correct answer to this question is =(1,000,000 * (6% - 5%) * 3/12)/(1 + (6%*3/12))=$2463.05. Since interest rates rose, the borrower gained as he has the right to borrow at a lower rate, and therefore the seller will pay the borrower.
(Here:
- $1m is the notional
- 6% - 5% represents the difference between the contracted and the realized interest rates
- 3/12 is the 3 month period from month 3 to 6
- Finally, we divide by the current interest rate for 3 months to present value the payment from month 6 to month 3)

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B. run autoroute -a 192.168.1.0/24
C. use auxiliary/servet/aocka

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