Which of the following is NOT true about a forward rate agreement (FRA)? Group of...
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Accounting
Which of the following is NOT true about a forward rate agreement (FRA)?
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By choosing the LIBOR zero rate as the specified interest rate, the contracting parties of an FRA ensure that no money initially changes hands.
As time passes, the value of an FRA can become positive or negative depending on the zero rates at the time.
An FRA is an over-the-counter contract designed to fix the interest rate that will apply to a certain principal amount during a specified future time period.
When an FRA is first negotiated, the specified interest rate usually equals the forward rate, so that the contract has zero value.
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