Mega Agree to pay a fixed rate of interest equal to 3% (based on quarterly compounding) for 3 months for a period of time beginning in 6 months. The notional size of of the size is $100 million. Now assume that two months have passed since Mega Trade entered into the FRA.

a. use the zero rates below to determine the value of the FRA to Mega Trader.

b. What can Mega Trader do to hedge its position? Explain why.

Maturity date (Months)	Zero Rate(%) - Continuous compounding
1	4
2	4.5
3	5
4	5.5
5	6
6	6.5
7	7
8	7.5
9	8
10	8.5
11	9
12	9.5