A company expects that on April 1, (which is 3 months from today) it will borrow $8 million for 91 days (that is, this loan will be repaid on July 1, 2013). If the 3 month and 6 month LIBOR are 1.5% and 2% per annum respectively, and the company enters into a Forward Rate Agreement with a bank, describe what the settlement will be at the maturity of the FRA if the 3 month LIBOR on April 1 is 1.8%.

Answer rating: 100% (QA)

A Forward Rate Agreement FRA is a financial derivative contract used to hedge or speculate on future ... View the full answer