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Suppose that a party wanted to enter into an FRA that expires in 42 days and is based on 137-day LIBOR. The dealer quotes a
Suppose that a party wanted to enter into an FRA that expires in 42 days and is based on 137-day LIBOR. The dealer quotes a rate of 4.75% on this FRA. Assume that at expiration, the 137-day LIBOR is 4% and the notional principal is $40,000,000.
Calculate the FRA payoff on a short position .
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