1. 2. In October 15, 2023, parties A and B enter into a forward-rate agreement (FRA)...

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1. 2. In October 15, 2023, parties A and B enter into a forward-rate agreement (FRA) in which A pays the fixed rate and B pays the floating LIBOR rate. The features of the FRA are Maturity Underlying Notional value One year 3-month forward rate (i.e., 3m LIBOR) $100m USD Currency a. (2) Let the related discount factors at time t=0 be_ d(1) = 0.98 and d (1.25)=0.975, calculate the fair fixed rate for the trade. b. (2) At maturity, the 3m LIBOR rate is 2.85%, calculate the P&L to A. c. (2) What is the P&L to B? [Continued from 1] If 6 months later, in April 15, 2024, we have the discount factors d(0.5) = 0.985 and d(0.75)=0.97. a. (2) What is the mark-to-market value of the FRA? b. (2) If party A chooses to close out the FRA, what will be his P&L? 1. 2. In October 15, 2023, parties A and B enter into a forward-rate agreement (FRA) in which A pays the fixed rate and B pays the floating LIBOR rate. The features of the FRA are Maturity Underlying Notional value One year 3-month forward rate (i.e., 3m LIBOR) $100m USD Currency a. (2) Let the related discount factors at time t=0 be_ d(1) = 0.98 and d (1.25)=0.975, calculate the fair fixed rate for the trade. b. (2) At maturity, the 3m LIBOR rate is 2.85%, calculate the P&L to A. c. (2) What is the P&L to B? [Continued from 1] If 6 months later, in April 15, 2024, we have the discount factors d(0.5) = 0.985 and d(0.75)=0.97. a. (2) What is the mark-to-market value of the FRA? b. (2) If party A chooses to close out the FRA, what will be his P&L?

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a 1 The fair fixed rate can be calculated using the formula Fixed Rate Present Value of Floati... View the full answer