ABC Bank (Seller) Has Made a "Three Against Six" Forward

question 26

Multiple Choice

ABC Bank (seller) has made a "three against six" Forward Rate Agreement (FRA) , with XYZ Bank (buyer) . The notional amount is $1,000,000, the settlement rate is 7%, the agreement rate is 6% and the actual number of days in the three-month agreement period is 92.
-Which of the following statements is true?

• A) ABC Bank will pay XYZ Bank a cash settlement at the beginning of the 92-day FRA period
• B) XYZ Bank will pay ABC Bank a cash settlement at the beginning of the 92-day FRA period
• C) ABC Bank will pay XYZ Bank a cash settlement at the end of the 92-day FRA period
• D) XYZ Bank will pay ABC Bank a cash settlement at the end of the 92-day FRA period

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Definitions:

Popular Front

A broad coalition of different political groups united for a common cause, often used to refer to leftist alliances.

Congress of Industrial Organizations

A federation of unions that organized workers in industrial unions in the United States and Canada from the 1930s to the 1950s.

Roosevelt Administration

Refers to the period of U.S. governance under President Franklin D. Roosevelt, known for the New Deal programs and leadership during World War II.

Economic Security

The situation where one has reliable financial resources or income to uphold their living standards both today and looking ahead.