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JPSem

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tT
发表于 2013-4-8 22:26 | 只看该作者

FRA IS schweser incorrect?

long, receive, contract, correct, LIBOR
Study Session 17, Reading #68, Concept Checkers Q10
Consider a $2 million FRA with a contract rate of 5% on 60day LIBOR. If 60day LIBOR is 6% at settlement, the long will:
A) pay $3,333
B) receive $3,300
c) receive $3,333
My answer is, the long will receive 18,867.92.
2m[(0.060.05)*60/360)]/[1.06*(60/360)]=18,867.92
Please correct me if my answer is incorrect.

 

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Windjam

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发表于 2013-4-8 22:26 | 只看该作者
They are looking for the formula on Swap interest payments which is (swap fixedlibor)(# days/360)(notional)

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BC_MBA_student

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3#
发表于 2013-4-8 22:27 | 只看该作者
saminathan I see the error in your formula it’s supposed to be
2m[(0.060.05)*60/360)]/[1 + (.06* 60/360)] = 3300 = B
Your one is:
2m[(0.060.05)*60/360)]/[1.06*(60/360)]
See the difference ?
In the denominator in the bracket keep it like 1 +( Refrence Rate * das/360)

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svgleeson

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发表于 2013-4-8 22:27 | 只看该作者
Supersunny,
thank you so much for pointing out the error.
Lately, I am making so many silly mistakes like this one.

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krause2

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5#
发表于 2013-4-8 22:27 | 只看该作者
saminathan the thing I do is just that I multiply the principal with the numerator and then that amount I discount to the denominator. Just a lil 2 step trick.
Good luck

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