A three-against-six forward rate agreement (FRA) has an agreement rate of 4.05% on the three-month LIBOR interest rate. You believe the three-month LIBOR interest rate will increase to 4.35% within the next three months. You decide to take a speculative position in the FRA with a $1,000,000 notional value. There are 90 days in the FRA period.

If the three-month LIBOR is 4.00% in three months, then what will your profit/loss be? Use a 360 day-count convention

Show your workings and the correct answer in the space provided below and also specify which party (purchaser or seller) makes a profit and which party makes a loss.

One of the following answers will be correct:

a. -$378.88

b. $480.77

c. $378.88

d. -$480.77