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Suppose that a party wanted to enter into a FRA that expires in 42 days and is basedon 137-day LIBOR. The dealer quotes a rate of 4.75 percent on this FRA. Assume thatat expiration, the 137-day LIBOR is 4 percent and the notional principal is$20,000,000.

A. What is the term used to describe such nonstandard instruments?

B. Calculate the FRA payoff on a long position.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91828623

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