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Payoff in Arrears

Suppose that the payment on the FRA is in arrears, that is, at day 210.

Then the investor who has purchased the FRA receives a payment on day 210 which depends on the 180 day LIBOR rate at day 30.

If at day 30, the 180 day LIBOR rate is 7%

How much will the long pay the short on day 210?

Solution Preview

Suppose that the payment on the FRA is in arrears, that is, at day 210.

Then the investor who has purchased the FRA receives a payment on day 210 which depends on the 180 day LIBOR rate at day ...

Solution Summary

This solution contains explanations and calculations to determine how much will the long pay the short on day 21.

$2.19