Suppose that KF Exports enters into an FRA with Interfirst Ban with notional principal of $50 million and the following terms: in six months, if LIBOR is above 6 percent, KF will pay Interfirst according to the standard FRA formula. On the other hand, if LIBOR is less than 6 percent, Interfirst will pay KF. If LIBOR is 5.5 percent in six months, who pays and how much will the company pay? What if LIBOR is 6.5 percent?
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