Suppose that 9-month and 12-month LIBOR are 6% and 8% with continuous compounding. ABC Inc. enters into a FRA with XYZ Inc. to receive the forward market rate and pay 15% measured with quarterly compounding, on a notional principal of $5 million for 3 months beginning after 9 months from now. (6 points)

1. Which party is the FRA seller and the FRA buyer?

= FRA Buyer What is value of this FRA to XYZ?

Answer rating: 100% (QA)

1 As ABC Inc is going to pay that interest rate so it has entered into a Buy FRA that means it is a ... View the full answer