# 20 million FRA payoff at expiration doubt!

Dear Forum,

I have a doubt suppose this situation I enter in a long FRA with a contract rate of 5% and a notional of 20 million USD, at the expiration the 180 day libor is 5,75% and the agreement expires in 60 days. the answer is

C) A and B are both Wrong, If it is the case I would apreciate if you could explain the right answer

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You’re long, so you pay fixed, receive floating.

The payoff is (5.75% − 5%) × \$20,000,000 = \$150,000, 240 days after inception (= 60 days + 180 days); the payoff at expiration is \$150,000 / [1 + (5.75% × 180/360)] = \$145,808.

There you go.

Simplify the complicated side; don't complify the simplicated side.

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thanks for the explanation

You’re welcome.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/