You Have Entered into a FRA with a Notional Amount

question 27

Multiple Choice

You have entered into a FRA with a notional amount of $100,000,000 which says that if 1-year LIBOR is greater than 5% then the bank will pay you and vice versa if the rate is less than 5%.At the end of the contract you find that 1-year LIBOR is 4.5%.What is the appropriate cash flow?

• A) the bank pays you $500,000
• B) you pay the bank $500,000
• C) the bank pays you 478,469
• D) you pay the bank 478,469

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Definitions:

Pudendal

Relating to the pudendal nerve, which supplies the muscles and skin of the perineum, playing a crucial role in the sensory and motor supply to pelvic area structures.

Genitofemoral

Relating to both genital and femoral (thigh) regions, often referring to a nerve providing sensation and motor function.

Common Fibular (Peroneal)

Relating to the nerve that branches from the sciatic nerve to innervate the lateral part of the shin and foot.

Brachial Plexus

A network of nerves that originates from the spinal cord in the neck and shoulders, providing motor and sensory signals to the upper limbs.