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On March 1, ABC Corporation signs a 6x24 month forward rate agreement with principal amount of 3 million at an agreed forward rate of

 

On March 1, ABC Corporation signs a 6x24 month forward rate agreement with principal amount of 3 million at an agreed forward rate of 6%, to hedge its planned future borrowing. On September 1st the realized spot rate for 18 month maturity borrowing is 5.7%. ABC Corporation is the notional borrowed in the forward rate agreement. What is the cash flow that ABC Corporation realizes on its forward rate agreement? Hint: The standard FRA contract payment has the form P(T2-T1) (R-R)/(1+(T2-T1)R).

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