Suppose that 9 -month and 12 -month LIBOR rates are (2 %) and (2.3 %), respectively. What

Question:

Suppose that 9 -month and 12 -month LIBOR rates are $2 \%$ and $2.3 \%$, respectively. What is the forward LIBOR rate for the period between 9 months and 12 months? What is the value of an FRA where 3\% is received and LIBOR is paid on $\$ 10$ million for the period. All rates are quarterly compounded. Assume that LIBOR is used as the risk-free discount rate.

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