Hi there, The answer provided for Q10 in the EOC for Reading 39 (Schweser Notes Book 4 page 120) looks bizarre for me. It is written that the pay-off for the FRA is the (FRA Rate-loan rate)* Nominal and at page 90 they are saying the payoff is (Libor- FRA rate)* Nominal. Is this a Schweser error in answering the question 10 or I’m missing something ? Thanks for your feedback.
Don’t have access to Schweser, but in standard CFA questions, the (floating) loan rate is assumed to be LIBOR/Euribor since the assumption is both parties have the creditworthiness of big banks thus can borrow that those rates.