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2. A three-against-nine FRA has an agreement rate of 4.45 percent. You believe six-month LIBOR in three months will be 5.325 percent. You decide to
2. A "three-against-nine" FRA has an agreement rate of 4.45 percent. You believe six-month LIBOR in three months will be 5.325 percent. You decide to take a speculative position in a FRA with a $1,500,000 notional value. There are 181 days in the FRA period. Determine whether you should buy or sell the FRA and what your expected profit will be if your forecast is correct about the six- month LIBOR nute. (20 points) 3. Crocius International can borrow $1,700,000 at LIBOR plus lending margin of 0.45 percent per annum on a three month rolaver basis from Citibank. Suppose that the three month LIBOR is currently 4 15/32 percent. Further suppose over the second three month interval LIBOR falls 4.120 percent. How much will Crocious pay in interest to Citibank over the six month period for the Eurodollar loan? (15 points)
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