Interest rate forwards-FRA

Q.1 How the following Forward Rate Agreements will be written in FRA Style?

a) 6 months loan in 2 months

b) 1 month loan in 2 months

c) 2 months loan in 3 months

d) 3 months loan in 2 months

Q.2 A company needs money Rs.1mn in 2 months for 3 months. Company is expecting surge in interest
rates and for that reason CFO contacted to bank for Forward rate agreement. Current KIBOR rate is 6%
but bank is offering 6.5% as a forward rate for our loan requirment. CFO accepted bank offer for future
borrowing. At the time of borrowing, KIBOR Reached at 8%. CFO contacted other bank for borrowing
and borrowed 1mn at KIBOR 8%. How much will be paid and by which party when FRA will be settled?
Assume CFO borrowed from other bank at 6% as KIBOR fall to 6% at the time of borrowing then repeat
the requirement with this case?

Q.3 A company needs Rs.5mn in 3 months’ time for 6 months. The company can hedge its exposure the
risk of rise in interest rates by buying 3x9 FRA. Bank is offering 3x9 are 5.40%-5.36%. Company is fixing
rate with offering FRA Bank. Suppose at the end of 3 months, KIBOR is 6.25%. How much amount will be
settled by bank at the time of FRA expiration? Suppose at the end of 3 months, KIBOR is 4.75%, how
much amount will be settled by bank at the time of FRA Expiration?

Q.4 Compute the amount that must be repaid on a $1mn loan for 30 days if 30 day LIBOR is quoted at
6%?

Q.5 Calculate the price of FRA 1 x 4 means 90 days loan in 30 days from now. The current 30 days LIBOR
is 4% and 120 day LIBOR is 5%?

Q.6 Assume in previous question, amount is required $1mn for 90 days and rate has increased to 6% at
the time of FRA expiration which is above than FRA Rate (5.32%). Calculate the value of FRA at maturity,
which is equal to the cash payment at settlement.

Q.7 After 10 days of FRA Initiation in previous question, Find the value of FRA (Valuation at 110 TH day) if
110 day LIBOR is 5.9% and 20 day LIBOR is 5.7%.