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Suppose that you enter into an FRA that is designed to ensure you will receive a fixed rate of 5% on a principal of $100

Suppose that you enter into an FRA that is designed to ensure you will receive a fixed rate of 5% on a principal of $100 million for a six-month period starting in two years. If three-month LIBOR proves to be 5.5% for the six-month period, what is the cash flow that is settled at the two-year point? Would this be a cash inflow or an outflow to you at the two-year point? *note: all interest rates here are expressed with semi-annual compounding. Choose from the following options

$243,309; cash inflow

$250,000; cash inflow

-$243,309; cash outflow

-$250,000; cash outflow

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