If the FRA Has a ________ of 5% for Three-Month

question 8

Multiple Choice

If the FRA has a ________ of 5% for three-month LIBOR (the ________) and the notional amount is for $10 million, the buyer is agreeing to pay 5% to buy or borrow $10 million at the settlement date and the seller is agreeing to receive 5% to sell or lend $10 million at the settlement date.

• A) settlement rate; contract rate
• B) reference rate; contract rate
• C) settlement rate; reference rate
• D) contract rate; reference rate

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Definitions:

Herfindahl Index

A measure used to assess the level of concentration and competition within an industry, calculated by summing the squares of market shares of all firms in the market.

Concentration Ratio

An economic metric that assesses the market share of the largest firms within an industry to evaluate the market's competitive landscape.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for differentiation and some degree of market power.