ABC Bank (seller) has made a "three against six" Forward Rate Agreement (FRA), with XYZ Bank (buyer). The notional amount is $1,000,000, the settlement rate is 7%, the agreement rate is 6% and the actual number of days in the three-month agreement period is 92.
-Which of the following statements is true?
A) ABC Bank will pay XYZ Bank a cash settlement at the beginning of the 92-day FRA period
B) XYZ Bank will pay ABC Bank a cash settlement at the beginning of the 92-day FRA period
C) ABC Bank will pay XYZ Bank a cash settlement at the end of the 92-day FRA period
D) XYZ Bank will pay ABC Bank a cash settlement at the end of the 92-day FRA period

Question

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The Answer of ABC Bank (seller) has made a "three against six" Forward Rate Agreement (FRA), with XYZ Bank (buyer). The notional amount is $1,000,000, the settlement rate is 7%, the agreement rate is 6% and the actual number of days in the three-month agreement period is 92.
-Which of the following statements is true?
A) ABC Bank will pay XYZ Bank a cash settlement at the beginning of the 92-day FRA period
B) XYZ Bank will pay ABC Bank a cash settlement at the beginning of the 92-day FRA period
C) ABC Bank will pay XYZ Bank a cash settlement at the end of the 92-day FRA period
D) XYZ Bank will pay ABC Bank a cash settlement at the end of the 92-day FRA period

ABC Bank (Seller) Has Made a "Three Against Six" Forward