Consider a 6×12 FRA where the underlying six-month period is 183 days and the notional is $100.The FRA fixed rate is 5%.At maturity of the contract the underlying Libor for six months is 7%.What is the settlement amount on the FRA? Assume the Actual/360 convention.
A)0.9683
B)0.9687
C)0.9817
D)1.0167

Question

Quizplus · Accepted Answer

Straightforward computation using the FRA payoff formula.The calculations are as follows:
> k=0.05
> L=0.07
> d=183
> payoff = (L-k)*d/360*100/(1+L*d/360)
> payoff
[1] 0.9817333

Consider a 6×12 FRA Where the Underlying Six-Month Period Is