A Forward Rate Agreement (FRA)is a Contract Between Two Banks

question 6

Multiple Choice

A forward rate agreement (FRA) is a contract between two banks:

• A) that allows the Eurobank to hedge the interest rate risk in mismatched deposits and credits
• B) in which the buyer agrees to pay the seller the increased interest cost on a notional amount if interest rates fall below an agreed rate, and the seller agrees to pay the buyer the increased interest cost if interest rates increase above the agreed rate
• C) that is structured to capture the maturity mismatch in standard-length Eurodeposits and credits
• D) All of these

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