An FRA entered into some time ago ensures that a company will receive 4% (with semi-annual compounding "s.a") on $100 million for six months starting in one year. The forward LIBOR rate for the period is 5% (s.a.) and the 1.5 year rate is 4.5% with continuous compounding. If the 6-month interest rate in one year turns out to be 5.5% (s.a.), what is the payoff from the FRA? -$0.75M = $100M times (0.04 - 0.055) times 0.5 What is the amount at which the transaction could be settled in one year? (i.e. value at time = 1.0) -$0.73M = (-$0.75M)/(1.0275)