What is the cash flow to the lender

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Reference no: EM131854264

Assume that a company enters into an FRA that is designed to ensure it will receive a fixed rate of 4% on a principal of $100 million for a 3-month period starting in 3 years. The FRA is an exchange where LIBOR is paid and 4% is received for the 3-month period. What is the cash flow to the lender at the 3.25-year point, if 3-month LIBOR proves to be 4.5% for the 3-month period?

Reference no: EM131854264

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