#### SamuelMartin

##### New Member

a) -12500,

b) -12290,

C) 12500

d) 12290

In the solution the correct answer is b. However, in the solution the amount given is positive, which answer would be D no B.

__My question is: It is positive or negative and why? Thank you so much__Solution:

The difference in the interest rates is 0.5% for one year, or 0.125% for 3 months; 0.125% of $10 million is $12,500. However, FRAs are settled at inception, not at maturity, so that $12,500 has to be discounted for three months at 6.85% (the market rate), to get a present value (at inception of the loans, 6 months after the initiation of the FRA) of $12,290