Matthew Enters into an FRA with the Local Bank

question 27

Multiple Choice

Matthew enters into an FRA with the local bank.The current one year forward rate is 4%.If the yield on a one year T-Bill in one year is 3.5%,what payment will be made to settle the agreement?

• A) Matthew would pay the bank 0.5%.
• B) Matthew will use the market rate rather than the FRA rate.
• C) The bank would pay Matthew 0.5%.
• D) Matthew would not exercise his option.

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Definitions:

Testicular Self-Exam

A self-conducted procedure by which an individual examines their own testicles to check for signs of testicular cancer or other anomalies.

Testicular Cancer

A type of cancer that originates in the testicles or testes, which are part of the male reproductive system.

Diagnostic Test

Medical tests designed to detect, diagnose, or monitor diseases, conditions, or vulnerabilities in individuals.

Sensation

The process of receiving and interpreting sensory information through sight, sound, touch, taste, and smell.