6. Suppose that CLGs treasurer hedges the firms interest rate risk using a 17 FRA with a contract rate of 5.125 percent.

a. Interpret the meaning of a 17 FRA.

b. Calculate the settlement amount on the FRA assuming short-term rates increase to 5.50 percent in one month.

c. Calculate the settlement amount on the FRA assuming short-term rates decrease to 4.50 percent in one month.