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Determine whether you should buy or sell the FRA

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Problem - A "three against nine" FRA has an agreement rate of 4.80 percent. You believe six-month LIBOR in three months will be 5.150 percent. You decide to take a speculative position in a FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the six month LIBOR rate.

Reference no: EM133052609

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