An FRA is most like which of the following transactions
A)an interest rate cap
B)an interest rate floor
C)an interest rate collar
D)a forward contract
E)none of the above

Question

Quizplus · Accepted Answer

An FRA (Forward Rate Agreement) is most similar to a forward contract because both involve an agreement made today for a transaction that will occur at a future date, at an agreed-upon price or rate. Unlike options or caps and floors, FRAs and forward contracts obligate both parties to the transaction.

An FRA Is Most Like Which of the Following Transactions