FRA Value

30 days ago, J. Klein took a short position in a $10 million 90-day forward rate agreement (FRA) based on the 90-day London Interbank Offered Rate (LIBOR) and priced at 5%. The current LIBOR curve is: 30-day = 4.8% 60-day = 5.0% 90-day = 5.1% 120-day = 5.2% 150-day = 5.4% The current value of the FRA, to the short, is closest to: A) −$15,495. B) −$15,280. C) −$15,154.,953662,953662#msg-953662

C 15,154

yes, I definitely missed the “Current Value” in the question. Here, we have to discount amount by whaterever the forward rate available for that period in the term structure. Here the period is 150 days and hence 5.4