A lender plans to invest $100m for 150 days, 60 days from today. (That is, if today is day 0, the loan will be initiated on day 60 and will mature on day 210.) The implied effective forward rate over 150 days, and hence the rate on 150-day FRA, is 2.5%. The actual interest rate over that period could be either 2.2% or 2.8%.

(a) If the interest rate on day 60 is 2.8%, how much will the lender have to pay if the FRA is settled on day 60? How much if it is settled on day 210?

(b) If the interest rate on day 60 is 2.2%, how much will the lender have to pay if the FRA is settled on day 60? How much if it is settled on day 210?