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- December 10, 2019 at 7:36 pm
Sir is it necessary that in FRA we will always get the same net income or payment when LIBOR increases or decreases? and if we do get the same income or payment than how many marks will be deducted if we dont get the same net income or payment in exam?
December 11, 2019 at 8:03 amYes – as I explain in my free lectures, the whole purpose of an FRA is to effectively fix the interest rate.
As to how many marks will be deducted, I have absolutely no idea. It depends on what the question asked, how many marks there were for this part, and what else you did correctly or wrongly.
December 11, 2019 at 8:27 amMy FRA didnt gave the same answer and i didnt notice that the net payment and APR should be the same. In the exam question I had to compare FRA with interest options. The question carried 8 marks.
The answer that I got from interest options was comparatively better than FRA (that I calculated). So I gave my recommendation that interest option is better even though I knew that interest option is not recommended due to premium .
So is it a minor mistake or my majority of the marks will be deducted?
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