A company approaches a bank and wants to borrow $14m from the bank starting in 345 days for 90 days. The bank sees the current market information as

• 345 day continuously compounded rate is 2.5067%.
• There is a Eurodollar futures contract expiring in 345 days with a price of 97.7253.

The bank sets their lending rate at 0.4% above fair.

At what rate does the bank set its rate? % (solve to 4 decimal places and write 4.0025 to represent 4.0025%)

From the bank's perspective what are the two cash flows on the lending. Remember a positive number represents the bank receiving cash. Round your answer to the nearest penny (0.01)

First Cash Flow	Second Cash Flow

What is the present value of this FRA from the bank's perspective? Round your answer to the nearest penny (0.01)

The company agrees to borrow from the bank. The bank immediately hedges this transaction with the Eurodollar futures contract. What position do they enter?

Briefly discuss the profit/loss from the Eurodollar futures position relative to the interest calculation on the FRA at the beginning and the immediate deposit/borrow at the end. Why are they different or the same? Answer this question in a few short sentences.