Forward Rate Agreement po polsku: Understanding the Basics of FRA in Polish Language
Forward Rate Agreement or FRA is a financial contract between two parties that allows them to lock in a future interest rate on a specified amount for a predetermined period. It is a widely used financial instrument for hedging and managing interest rate risks. Forward Rate Agreement po polsku refers to the same financial contract expressed in the Polish language.
Understanding Forward Rate Agreement
In a Forward Rate Agreement, the buyer agrees to pay a fixed interest rate on a specified amount of money to the seller at a future date. The seller, on the other hand, agrees to pay the buyer the prevailing market interest rate on the same amount of money on the same future date. The difference between the fixed interest rate and the prevailing market interest rate is settled in cash, which is known as the settlement amount.
For example, let`s say that a business owner wants to borrow $100,000 in six months to finance its expansion plan. However, the owner is worried that interest rates may rise in the future, which would increase its borrowing costs. To hedge against interest rate risks, the business owner can enter into a six-month FRA with a bank. The bank agrees to lend the business $100,000 at a fixed interest rate of 3% in six months. If the prevailing market interest rate at that time is 4%, the bank would pay the business the difference, which is 1% or $1,000 in cash.
FRA in Polish Language
Forward Rate Agreement po polsku is referred to as Umowa terminowa stopy procentowej in the Polish language. Umowa terminowa implies a contractual agreement on a specified future date, while stopy procentowej refers to the interest rate. Therefore, Forward Rate Agreement po polsku can be translated as a contractual agreement on a specified future date to exchange at a fixed interest rate.
The use of Forward Rate Agreement in Poland is not very common, but it is gaining popularity among businesses to manage their interest rate risks. Therefore, it is essential to understand the terms and conditions of the contract before entering into an FRA.
Conclusion
In summary, Forward Rate Agreement po polsku is a financial contract expressed in the Polish language, which allows businesses to manage their interest rate risks by locking in a future interest rate on a specified amount for a predetermined period. It is an effective hedging tool to protect businesses from adverse movements in the interest rate market. Therefore, businesses should consult their financial advisors and legal experts before entering into an FRA.