1. Suppose that you can borrow or lend at LIBOR. You wish to borrow $100,000 starting in 3 months for a duration of 2 months. The current 3v5 borrowing rate is 2.75%.
   1. What is the amount you expect to pay back at the end of 5 months from this loan?
   2. Now suppose that you lock in this rate. 3 months from now, you see the following LIBOR curve:

Duration	1 month	2 months	3 months	4 months	5 months
Rate (%)	2.26	2.35	2.45	2.51	2.53

What should be the cash flow from your FRA?

3. To actually effectively borrow $100,000 for 2 months, you will need to actually borrow since the FRA is cash-settled. How much will you need to borrow and at what interest rate can you do so? Show that the amount owed at the end of this 2-month loan is the same as your calculation in (a).