A Forward Rate Agreement (FRA) Is a Contract Between Two

question 12

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 the above

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