Financial Risk Manager Part 1

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Explanation:

Correct answer: C — Company receives `$24`,631

First, compute the FRA payoff at the end of the borrowing period:

\text{Payoff} = 10{,}000{,}000 \times (6.0\% - 5.0\%) \times 0.25 = 25{,}000

Because the FRA settles in advance at $T=1.0$ , this amount is discounted for the 90-day period:

\text{Settlement} = \frac{25{,}000}{1 + 6.0\% \times 0.25} = 24{,}631

So the company receives `$24`,631 under the FRA.

Explanation:

Correct answer: C — Company receives `$24`,631

First, compute the FRA payoff at the end of the borrowing period:

\text{Payoff} = 10{,}000{,}000 \times (6.0\% - 5.0\%) \times 0.25 = 25{,}000

Because the FRA settles in advance at $T=1.0$ , this amount is discounted for the 90-day period:

\text{Settlement} = \frac{25{,}000}{1 + 6.0\% \times 0.25} = 24{,}631

So the company receives `$24`,631 under the FRA.

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MManit

Last updated: April 18, 2026 at 11:32

Company pays `$24`,631

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Company pays `$25`,000

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Company receives `$24`,631

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Company receives `$25`,000