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Suppose an investment manager wanted to enter into an FRA that expires in 185 days and is based on the 90-day LIBOR. The dealer quotes

Suppose an investment manager wanted to enter into an FRA that expires in 185 days and is based on the 90-day LIBOR. The dealer quotes a rate of 5% on this FRA. Assume that on the settlement date, the 90-day LIBOR is 4.4% and the notional principal is $10 million.

What is the payoff on a short position in the FRA at settlement?

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