On December 5^th 2011, Alison was advised by her bank that her application for a bill acceptance facility that would allow her to issue 120-day bank bills with a total face value of $850,000 in June 2012, was successful. These will be sold to yield BBSW+0.5% p.a. Concerned that interest rates may rise before the bills are issued on June 5^th, Alison assembled the following FRA quotations payable against the reference rate of BBSW.

FRA Lender Borrower

6/9 5.5% p.a. 6.5% p.a.

6/10 5.6% p.a. 6.6% p.a.

9/12 5.9% p.a. 6.9% p.a.

10/13 6.0% p.a. 7.0% p.a.

Clearly state how Alison should use an FRA to hedge her exposure, and calculate the amount, direction, and date of the payment at settlement if, on the settlement date BBSW is 5.1% p.a.