Reading 47 How to calculate the market value for FRA

[San15]

Practice Problem Page 49 Question 9 Sub Section C
Given 135 days Interest Rate is 5.90%
Given 315 days Interest Rate is 6.15%
We caluclated 6 X 12 FRA to be 6.03% in Part B
9(C) Cal the market value of this FRA based on NP of $10M.
My work
(1+0.0615*315/360)=(1+0.0590*135/360)(1+a*180/360)
a=6.2003%
Value=(0.062003-0.0603)*(180/360)*$10M = $ 8515 Book Answer is $8100
What is wrong?

 

[S666]

I havnt checked that particular example but perhaps because you havn’t discounted the payoff back to the present? The value of $8515 is the future value that will be paid at the end of 315 days.

 

[cpk123]

8515 / (1+(0.0615*315/360)) = 8080 …. approx 8100 that you have…

 

[San15]

Thank you so much. Appreciate your response.