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I just have a small doubt in this.
Suppose FRA quoted at 4.82% 3-7 oki
if actual market rate is 4.99% and its investment
so as per my understanding this is how we do it oki?
we fixed at 4.82% but the actual market rate is 4.99% so we have to get a receipt of the difference is that ryt?
suppose if its borrowing then how do u do it?Whether borrowing or investing, you pay or receive the actual interest rate. However you then settle up with the bank (either you pay them or they pay you) the difference between the FRA rate and the actual rate.
So the end result (in your example) is that the will end up paying or receiving 4.82% (depending on whether they are borrowing or depositing).
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