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hi sir,
is it true that forward rate agreement hedges against adverse and favourable movement in interest rates, but it does not take advantage of favourable interest rate?
Yes it is true.
I do suggest that you watch my free lectures on this, because I do explain exactly how FRA’s work. FRA’s effectively fix the interest rate and what happens to the actual interest rate is then irrelevant.
The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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