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Forward Contracts and FRA

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Forward Contracts and FRA

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • August 15, 2021 at 11:57 am #631629
    Faizahmad1009
    Member
    • Topics: 33
    • Replies: 20
    • ☆☆

    Is it true that the difference between Forward Contracts and FRA is that:

    Forward rates are used to buy & sell Foreign Currency because of exchange rate changes in future; whereas FRA is used to BORROW or LEND because of interest rate changes in future.

    Please correct me that FRA is used to BORROW or LEND Foreign Currency or Local Currency?

    August 15, 2021 at 12:33 pm #631642
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51573
    • ☆☆☆☆☆

    Forward rates apply to foreign currency and fixe a future exchange rate.

    FRA’s are nothing to do with foreign currency and are use to fix the interest rate on future borrowings or deposits.

    Have you watched my free lectures on all of this?

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