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Maturity (days) LIBOR 90 .10.13% 180 .9.42% 270 .9.12% 360 8.77% The City knows it will need to borrow $225 million in 6 months time

Maturity (days) LIBOR

90 .10.13%

180 .9.42%

270 .9.12%

360 8.77%

The City knows it will need to borrow $225 million in 6 months time for 3 months. The Treasurer is concerned that rates may rise, so he is buys a zero cost FRA using the term structure implied by the table of LIBOR rates . Suppose in 6 months, all interest rates have risen by 75 basis points. What is the cash flow to the City from this FRA?

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