we can by at any on settled or fixed rate
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Answer:
Forward rate agreements (FRA) are over-the-counter contracts between parties that determine the rate of interest to be paid on an agreed upon date in the future. In other words, an FRA is an agreement to exchange an interest rate commitment on a notional amount.
The FRA determines the rates to be used along with the termination date and notional value. FRAs are cash-settled. The payment is based on the net difference between the interest rate of the contract and the floating rate in the market—the reference rate. The notional amount is not exchanged. It is a cash amount based on the rate differentials and the notional value of the contract
Calculate the difference between the forward rate and the floating rate or reference rate.
Multiply the rate differential by the notional amount of the contract and by the number of days in the contract. Divide the result by 360 (days).
In the second part of the formula, divide the number of days in the contract by 360 and multiply the result by 1 + the reference rate. Then divide the value into
Multiply the result from the right side of the formula by the left side of the formula..
Explanation:
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