Forward rate agreement payoff calculations

I was going through SFM.. Derivatives..I had a doubt whether what i was doing was right..so please guide me in case i m wrong:

E.g.

FRA 2*8

Notional Principal : 50,00,000$

FR: 10%

Settlement : 2 months

Actual LIBOR (for 180 days) @ end of contract period(2months) : 8%

Solution:

Buyer pays Fixed rate of 10% at end of 8 months = $50,00,000*10%*6/12 = $ 2,50,000

Buyer received at Actual LIBOR on date of expiration at end of 8months: $50,00,000*8%*6/12 = $ 2,00,000

Buyer's Loss at end of 8 months = $50000

Loss discounted to end of contract expiration = $50,000 @ 8% (for 6 months) OR $50,000 @ 4% = 50000*100/104 = $48077

Is this solution right??

Replies (2)
its right. U can also solve by (2% of $50 lacs* 6/12)= 50000 Now, 50000/1.04. The result will be same. We get 2% as the diff btween 8&10 percent. All the best.

Thanks..was confused a bit after i saw an illustration in padhuka..I suppose its wrong then..

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