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What is a Forward Rate Agreement (FRA)?

Agreement forward FRA rate
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What is a Forward Rate Agreement (FRA)?

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A. FRA is an agreement between two parties who agree on a fixed rate of interest to be paid/received on a fixed date in the future. The interest exchange is based on a notional principal amount for a term of no greater than six months. FRA’s are used to assist companies manage interest rates exposures.

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