What Is a Forward Rate Agreement

question 74

Essay

What is a forward rate agreement?
Explain,with an example,how such an agreement can be used as a hedging instrument.

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Definitions:

Internal Control

Strategies and systems put in place by an organization to maintain the reliability of its financial and accounting data, encourage responsible behavior, and deter deceitful practices.

Invoice Approval

The process of reviewing and verifying invoices from suppliers before payment is made, to ensure that the charges are correct and services or goods were received.

Bonded

Refers to a business or individual that has purchased a surety bond, a type of insurance policy that protects against losses caused by the bonded party.

Insurance Policy

A contract between an insurer and a policyholder that specifies the terms of the insurance coverage.