Why are they doing .05 - .045? for the first part. The text earlier in the book did not use Libor AND the added BPs until the discounting part (ex/ LIBOR + 150bps). But now they use LIBOR +added BPs for the first part? What gives? Following the text, it should be .05-.03*500000 -> 100000/(1.03+.015) and then discounted by (1.028)^5/12
Problem was already discussed. Schweser calculations regarding the FRA are definitly not market standard. Similar calc is Not appearing anywhere in CFAI books - would simply ignore the numbers and concentrate on fundamentals regarding credit risk on the various Instruments.
I have seen this conversation about FRA show up a couple of times in the Level III forum. However I do see in the Futures / Forwards Chapter of Derivatives Risk Mgmt. that this FRA section is Optional material. Am I missing something and the FRA is present as required in some other section? Would appreciate if someone can clarify.