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..

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
23 October 2026
Sr. Accountant

SANKARAN & KRISHNAN

New Delhi

B.Com

View Details
Company
ARTICLESHIP 07 November 2026
Article Assisstant

DPV & Associates

Chennai

CA Inter

View Details
Company
30 October 2026
Asst Manager Accounts

Goodwin Pumps India Pvt Ltd

Chengalpattu

CA Inter

View Details
Company
ARTICLESHIP 22 October 2026
Articleship intern

Srinath Manikanta

Hyderabad

CA Inter

View Details
Company
Featured 29 October 2026
Accounts Executive

Synergy Keystone

Chennai

B.Com

View Details
Company
10 November 2026
FP&A Executive

Gujarat Guardian

Ankleshwar

CA Final

View Details
Company
ARTICLESHIP 23 October 2026
CA Articleship / Article Assistant

M N Rao & Associates LLP

Vijayawada

CA Inter

View Details
Company
Featured ARTICLESHIP 28 October 2026
CA- Inter and Articles

N N V Satish & Co.,

Hyderabad

CA Inter

View Details