If the FRA has a ________ of 5% for three-month LIBOR (the ________) and the notional amount is for $10 million, the buyer is agreeing to pay 5% to buy or borrow $10 million at the settlement date and the seller is agreeing to receive 5% to sell or lend $10 million at the settlement date.

Question

Quizplus · Accepted Answer

The correct terms are "contract rate" for the agreed-upon interest rate in the FRA, which is 5% in this case, and "reference rate" for the three-month LIBOR that the contract rate is compared against at the settlement date.

If the FRA Has a ________ of 5% for Three-Month