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Eight months ago, a bank shorted a $55 million forward rate agreement at an interest rate of 3.5% per year because it was concerned about
Eight months ago, a bank shorted a $55 million forward rate agreement at an interest rate of 3.5% per year because it was concerned about interest rates decreasing. The forward rate agreement has a term of three months and it expires in seven months. The current interest rate for a similar forward rate agreement is 3.25% per year. If the ten-month continuously compounded discount rate is 3.6% per year, what is the value of the bank's position? 1) $36,902 2) -$36,902 3) $33,359 4) -$38,245 5) $38,245
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