Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Alolo has bought from BolBank a 3 versus 6 Forward Rate Agreement which is based on a notional principal amount of USD 5 million and an agreed rate of 2% per annum. At the start of the FRA period, the actual rate of interest is 1.5% per annum.
Explain what will take place at the start of the Forward Rate Agreement
period and calculate the reimbursable amount, assuming a 360-day year.
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