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Basic Question 8 of 9

Kevin, a corporate treasurer, wants to hedge against an increase in future borrowing costs. He plans to enter into a long 3 x 9 FRA. The current term structure for LIBOR is 30 day - 4.89%; 90 day - 5.10%; 180 day - 5.27%; 270 day - 5.52%; 360 day - 5.65%. What is the rate Kevin would receive on a 3 x 9 FRA?
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User Contributed Comments 3

User Comment
danlan2 3x9 FRA means 90 days to 270 days.
dblueroom means based on 180-day LIBOR 90 days from now.
quanttrader here 3 x 9 means fra to be recvd 3 months from now based on 9-3 = 6 month rate.

F(0,h,m) = [[(1+L(h+m))x(h+m/360)] / [(1+L(h))x(h/360)]]x 360/m
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
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Learning Outcome Statements

describe how interest rate forwards and futures are priced, and calculate and interpret their no-arbitrage value;

CFA® 2025 Level II Curriculum, Volume 5, Module 31.