You are a bank and your customer asks you to quote an agreed-upon rate for a 3*6 FRA.You observe the following rates:
What rate should you quote?

Question

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*6 FRA.You observe the following rates: 
 What rate should you quote?

Quizplus · Accepted Answer

The FRA is for a one-month period starting three months from now (3F1F1F), meaning it expires in four months. 
Looking at the table, we see the 4-month rate is 5.88% and the 5-month rate is 6.04%. 
The agreement is for the difference between these rates, so the quoted rate should be the average of the two, which is (5.88% + 6.04%) / 2 = 5.96%. 
Therefore, the answer is not A or C, and the closest answer is B, which is the correct answer.

You Are a Bank and Your Customer Asks You to Quote