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Suppose that 12-month and 15-month LIBOR are 8% and 11% with continuous compounding. ABC Inc. enters into a FRA with XYZ Inc. to receive the

Suppose that 12-month and 15-month LIBOR are 8% and 11% with continuous compounding. ABC Inc. enters into a FRA with XYZ Inc. to receive the forward market rate and pay 13% measured with quarterly compounding, on a notional principal of $13 million for 3 months beginning 12 months from now. (5 points)

What is value of this FRA to the FRA buyer?

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