A $100 Notional 6×12 FRA Has the Following Features at Inception

question 26

Multiple Choice

A $100 notional 6×12 FRA has the following features at inception. The first six month period is 182 days and the second is 183 days. The locked-in rate on the FRA is 6%. After one month the 5×11 FRA is trading at a fair strike of 6.2% with 151 days in the first five month period. What is the value of the FRA to the buyer if the five-month Libor rate at this point is is 5%?

• A) (+0.0965)
• B) (?0.0965)
• C) \(+ 0.0986\)
• D)( -0.0986)

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Definitions:

Fruit Foraging

The activity of searching for and gathering wild fruits as a source of food.

Larger Brains

Refers to species or individuals that have relatively bigger brains, often associated with higher cognitive functions.

Primates

An order of mammals including humans, monkeys, and apes, characterized by large brains, forward-facing eyes, and opposable thumbs.

Brain Size

The volume or weight of the brain, often discussed in relation to body size or intelligence across different species.