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Hello there,
Wanted to confirm with you if my understanding is correct. I’m self studying so i read many books and got v. confused.
For FRA theres lender and borrower.
in borrower position (when the question mention that the company wish to borrow), hence:
FRA rate > LIBOR = company pays the bank
FRA < LIBOR= bank pays coin lender position (when question mentions that the company wish to invest), hence
FRA < LIBOR = company pays bank
FRA > LIBOR = bank pays coPlease correct me if im wrong.
Appreciate your help very much
Regards,
ArinaDear tutor, can i ask why in wardegul examiner’s article when
Libor > FRA its company pay the bank.is it because the situation is they are “investing”
You are correct except insofar as it is not LIBOR that is relevant. It is whatever the interest rate being charged actually is at the time the loan or deposit starts.
I do suggest that you watch my free lectures on interest rate risk management.
I see okay..understood about that. Just that for simplicity sake i just took libor.. Noted that its the reference rate 🙂 I’ll be watching all of your videos when im done with this wardegul. I always refer to OT because im self studying. My strategy is to read the textbook then read all the examiners article then only watch open tuition and then do questions. Thank OT for helping me pass acca. special mention to chris!he helped me alot in f7 and sbr. OT is a blessing, the rapport and ease of knowledge im getting with OT is far more than what i had experienced in the past with tuition and uni. Passed f56789 with OT in half a year sbr and sbl and p7 in 3 months. Oh thanks again for answering my question
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