Consider the buyer of a 6 ×9 FRA. The contract rate is 6.35% on a notional amount of $10 million. Calculate the settlement amount of the seller if the settlement rate is 6.85%. Assume a 30/360 day count basis.
　　A. —12,500
　　B. —12,290
　　C. +12,500
　　D. +12,290
　　Answer:B
　　The seller of an FRA agrees to receive fixed. Since rates are now higher than the contract rate, this contract must show a loss for the seller. The losses $10,000,000×(6.85%-6.35%)×(90/360) = $12,500 when paid in arrears, i.e., in nine months. On the settlement date, i.e., brought forward by three months, the loss is $12,500/(1+6.85%×0.25) =$12,290.