1. An investor wants to lock in the interest rate for a three-month period beginning three months from today on a principal of $4 million. To achieve this purpose, the investor enters into a forward rate agreement (FRA) with its bank today. The agreement rate with the bank is 5.5%. There are actually 92 days in the three-month FRA period. Assume that three months from today the settlement rate is 4.45%.

1. Determine the payment amount under the FRA three months from today. Who will make the payment and why?
2. How could this investor achieve his/her goal by trading Eurodollar futures? Explain.