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The LIBOR yield curve is flat at 6 % per annum. An FRA is designed where the holder receives fixed interest at the rate of

The LIBOR yield curve is flat at

6 %

per annum. An FRA is designed where the holder receives fixed interest at the rate of

8 %

per annum for a

6 -

month period on a principal of $

1

Million starting in two years. Note that all rates are quoted with semi

-

annual compounding.

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