Arbitrage in forward rate agreement.....???

Sangita gupta (final Student) (312 Points)

27 March 2012  

 

Please explain the concept of Arbitrage in FRA (forward rate agreement).

 

Please solve following Question:

3 month interest rate is = 8% p.a.

6 month interest rate is 10 %

3 X 6 FRA = 11%-12%

Is arbitrage is possible? please provide me the solution.