If at the Settlement Date the Settlement Rate Is ________

question 2

Multiple Choice

If at the settlement date the settlement rate is ________ the contract rate, the FRA buyer ________ because the buyer can borrow funds at a below-market rate.

• A) equal to; suffers
• B) greater than; suffers
• C) less than; benefits
• D) greater than; benefits

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Definitions:

Depreciation

Allocating the value of a tangible asset over the period it is expected to be used, in a systematic manner.

Fixed Asset

A long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income, not expected to be consumed or converted into cash within a year.

Useful Life

The estimated period over which an asset is expected to be usable by an organization, affecting its depreciation calculation.

Present Value Factor

A multiplier used to determine the present value of a future amount of money or stream of cash flows given a specific discount rate.