A company expects to receive $30,000,000 in 60 days and will use it to invest in a 90-day bond. The company enters into a Forward Rate Agreement (FRA) expiring in 60 days, with the notional amount of $30,000,000. The forward rate is 90-day LIBOR at 4.50%. Required:

1) Should the company take a long or short position in the FRA? Briefly explain.

2) If the actual 90-day LIBOR on the expiration date is 3.75%, what is the payoff of the FRA?