A three-against-nine FRA has an agreement rate of 4.75 percent. You believe six-month LIBOR in three months will be 5.125 percent. You decide to take a speculative position in a FRA with a $1,000,000 notional value. There are 183 days in the FRA period. Determine whether you should buy or sell the FRA if you are quite sure about the LIBROR in 3-month and explain why.

Since the agreement rate is less than your forecast, you should sell a FRA.

Since your are not sure about the LIBOR in 3-month, you should buy a FRA.

Since the agreement rate is less than your forecast, you should buy a FRA.

Since your are not sure about the LIBOR in 3-month, you should sell a FRA.