Gahnneco inc. engaged in an FRA with Burkwith enterprises. Gahnneco has agreed to pay SOFR which is presently 3.19% EAR and in exchange will receive 9.4% EAR on a notional principal of $76467998 for the next 98 days. Assuming that the date convention is 365 days per year, what is the value of this FRAP to Gahnneco?

When replying, if the benefits exceed costs for Gahnneco your response should be positive. If instead the costs exceed the benefits the value would be negative and we might expect Gahnneco to receive compensation from Burkwith in such cases.

Answer rating: 100% (QA)

To determine the value of the Forward Rate Agreement FRA to Gahnneco we need to calculate the cash f... View the full answer