lcw77

Thanks that clears it up a little.

I guess where I am confused is where it says "Under the assumption that LIBOR stays at the current level of 6%, the bank will be required to pay the manager $9,259.26 (which is 10,000/1.08) at the beginning of the loan (i.e., at the expiration of the FRA)"

Why would the bank only have to pay $9,259.26 when the FRA expires. I would think the payment of 10k should be discounted by the reference rate (LIBOR = 6%).

If the two contracts are separate, why would the bank benefit by having they payment dicounted by the loan amount