6. Your rich uncle died and left you a legacy of $150 million and you wish to invest this in fixed income instruments. However you will be receiving this amount about seven months later. You wish to hedge against adverse interest rate movements until that time using 7 x 12 FRA. The current LIBOR term structure is as follows

Maturity	Int Rate
90 Day	6.15%
120 Day	6.25%
180 Day	6.75%
210 Day	7.05%
270 Day	7.70%
360 Day	8.35%

a. When does this FRA expire and what is the underlying rate?

b. What is the FRA rate quoted by the bank?

c. Suppose after 52 days the LIBOR term structure is as follows, what is the market value of the FRA?

Maturity	Int Rate
94 Day	5.95%
128 Day	6.19%
158 Day	6.55%
282 Day	7.06%
302 Day	7.12%
308 Day	7.14%
352 Day	7.33%
360 Day	7.35%

d. At expiration the LIBOR structure is 5.97%( 90-Day), 6.04%(120-Day), 6.46%(150-Day), 6.95%(180-Day) and 7.01%(210-Day). What is the payoff on the FRA and who pays this amount to whom?