A company will need to 'roll over' its existing $390561 funding arrangement in two months' time for a further 180 days. It is concerned that interest rates in the short-term debt market may rise in the mean time, and decides to manage the risk exposure by entering into a forward rate agreement with its bank. The bank quotes a price (2Mv8M) of 8.38 to 10. In two months' time the reference rate (BBSW) is 8.8% per annum. Calculate the settlement amount.

Answer rating: 100% (QA)

To calculate the settlement amount for the forward rate agreement FRA we need to follow these s... View the full answer