Dollar settlement of the fra


Suppose that in order to hedge interest rate risk on your borrowing, you enter into a FRA that will guarantee a 6% effective annual interest rate for one year on $500.000. On the date you borrow the $500.000 the actual interest rate is 5%. Determine the dollar settlement of the FRA assuming:

• Settlement occurs on the date the loan is initiated

• Settlement occurs on the date the loan is repaid

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Dollar settlement of the fra
Reference No:- TGS050151

Expected delivery within 24 Hours