A $100 Notional 6×12 FRA Has the Following Features at Inception.The

question 1

Multiple Choice

A $100 notional 6×12 FRA has the following features at inception.The first six month period is 182 days and the second is 183 days.The locked-in rate on the FRA is 6%.After one month the 5×11 FRA is trading at a fair strike of 6.2% with 151 days in the first five month period.What is the value of the FRA to the buyer if the five-month Libor rate at this point is is 5%?

• A)+0.0965
• B)-0.0965
• C) \(+ 0.0986\)
• D)-0.0986

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Definitions:

Labor Demand Curve

A graphical depiction of the relationship between the quantity of labor that employers wish to hire and the wage rate, assuming other factors are constant.

Marginal Product

The increase in output resulting from an additional unit of input, while keeping other inputs constant.

Total Product

The total quantity of output produced by a firm for a given quantity of inputs.

Maximize Profit

The strategy or process aimed at achieving the highest possible profit from business activities, considering revenues and expenses.