CIMA Exam CIMAPRA17-BA1-1 Topic 1 Question 15 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam

Question #: 15
Topic #: 1

An investor has bought a financial asset that pays a variable interest rate at the end of a three-year period At the same time, the invest forward rate agreement (FRA) on an agreed forward rate of 3% at the asset's maturity. What is the advantage of the FRA?

AIf the market interest rate at the asset's maturity is lower than 3%. the bank will pay the investor for the difference in rates

BIf the market interest rate at the asset's maturity is lower than 3%. the asset's maturity will be extended for another year

CIf the market interest rate at the asset's maturity is higher than 3%, the investor will have the option to drop the FRA upon payment

DIf the market interest rate at the asset's maturity is higher than 3%, the investor will be able to receive the higher market rate

Show Suggested Answer

Suggested Answer: A

by Lashaunda at May 05, 2022, 11:05 AM

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