You Bought a EUR 8,000,000 6x9 FRA at 4

question 156

Multiple Choice

You bought a EUR 8,000,000 6x9 FRA at 4.50%. The settlement rate is 3-month (90-day) EURIBOR, which is fixed at 3.50%. What is the settlement amount at maturity?

• A) You pay EUR 20,000.00
• B) You receive EUR 20,000.00
• C) You pay EUR 19,826.52
• D) You receive EUR 19,826.52

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Definitions:

Economies Of Scale

Cost advantages that a business obtains due to expansion, seen in the form of reduced costs per unit as output increases.

Profit-Maximizing

The method or approach of adapting manufacturing and selling activities to secure the maximum potential profit.

Competitively Organized Industry

An industry characterized by many firms competing against each other in a market to sell their products.

Network Effects

The phenomenon where a product or service becomes more valuable as more people use it.