You Entered in to a 3 × 6 Forward Rate

question 10

Multiple Choice

You entered in to a 3 × 6 forward rate agreement that obliged you to borrow $10,000,000 at 3 percent.Suppose at the maturity of the FRA,the correct interest rate is 3.5 percent.Clearly you are better off since you have the ability to borrow $10,000,000 for 3 months at 3 percent instead of 3.5 percent.What is the payoff at the maturity of the FRA?

• A)Net payment of $12,391.57 to you
• B)Net payment of $12,500 to you
• C)Net payment of $50,000 to you
• D)Net payment of $48,309.18 to you