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2) You entered into a forward rate agreement (FRA) some time ago as the borrower (long position) and agreed upon rate was 3.75% on $100

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2) You entered into a forward rate agreement (FRA) some time ago as the borrower (long position) and agreed upon rate was 3.75% on $100 million for 1 year starting in 6 months from today. The current Forward LIBOR (i.e. the current FRA rate) for this period is 5.25%. The risk- free rate is 4% per annum with continuous compounding for all horizons up to 1.5 years from now. What is the value of the FRA to you, the borrower, today? Remember FRA rates are quoted with compounding for the horizon of the FRA. A) $-1,500,000.00 B) $-1,470,298.01 C) $-1,412,646.80 D) $1,412,646.80 E) $1,500,000.00

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