Consider a 1 x 4 FRA of $20,000,000 notional amount, which expires in 90 days and is based on 90-day LIBOR. The current 30-day LIBOR is 5.5% and 120-day LIBOR is 5.14%.

a) Calculate forward rate at contract initiation.

Assume that 20 days has passed into the life of FRA, with 10 days remaining and the 10-day LIBOR is 5.25% and 120-day LIBOR is 5.10% now after 20 days.

b) Calculate forward rate after 20 days of contract initiation.

c) Calculate the value of the pay-fixed 1 x 4 FRA after 20 days of contract initiation.

d) Who will be in gain, the buyer or the seller of this FRA and why? Also assume that each day comprises of 30 days and a year 360 days.