Consider an FRA, with a notional principal of $10 million, a delivery date in 3 months, and an FRA rate of 6%, which will be paid for a 6 month period starting on the delivery date. The 6 month rate on the delivery date of the FRA is forecasted to be 6.25%. Assume that these rates are semi-annually compounded. The current 9 month continuously compounded LIBOR rate is 6.5%.calculate  The value of the FRA to the purchaser.

Answer rating: 100% (QA)

SOLUTION To calculate the value of the FRA to the purchaser we need to first determine the settlemen... View the full answer