a question about LIBOR FRA why, understand, question, receive

chenzheruc

I don't quite understand why it is ``pay'' not ``receive'' here.....
Anyone knows why A is correct here?
Thanks very much!

Consider a $2 million FRA with a contract rate of 5% on 60-day LIBOR. If 60-day
LIBOR is 6% at settlement, the long will:
A. pay $3333
B. receive $3000
C. receive $3333

Correct: A

felix583

Because a long position means paying floating and receive fixed.

(0.05-0.06) * 60/360 *2,000,000 = -3,333

Negative sign means paying out.

felix583

Because a long position means paying floating and receive fixed.

(0.05-0.06) * 60/360 *2,000,000 = -3,333

Negative sign means paying out.