[Verse 1]
When you're worried 'bout the rates tomorrow
Will they rise and bring you sorrow?
There's a contract you can make today
Lock the future rate in place to stay
Forward Rate Agreement is the name
Helps you play the interest rate game
[Chorus]
F-R-A, lock it in today
Future rate protection comes your way
F-R-A, when the future's unclear
Set your rate and calm your fear
Lock and settle, that's the way
F-R-A saves the day
[Verse 2]
Here's the structure, let me break it down
Notional amount is the baseline ground
Contract rate versus market rate
Settlement date, don't be late
If market's higher, you receive the cash
If market's lower, you pay the stash
[Chorus]
F-R-A, lock it in today
Future rate protection comes your way
F-R-A, when the future's unclear
Set your rate and calm your fear
Lock and settle, that's the way
F-R-A saves the day
[Bridge]
Borrowers fear the rates will climb
Lenders worry 'bout decline
FRAs help both sides sleep tight
Managing risk with all their might
No exchange of principal amount
Just the difference is what counts
[Verse 3]
Three-by-six or six-by-nine
These are common FRA designs
First number shows when it starts
Second shows when it departs
Payoff comes at settlement day
Discounted to present value way
[Chorus]
F-R-A, lock it in today
Future rate protection comes your way
F-R-A, when the future's unclear
Set your rate and calm your fear
Lock and settle, that's the way
F-R-A saves the day
[Outro]
When interest rates make you frown
FRAs won't let you down
Lock the future, sleep at night
Forward contracts make it right