9. The treasurer of XYZ Corp. knows that the company will need to lend $100 million in one year for a one year period. LIBOR rates today are at 4% but the companys treasurer expects LIBOR rates to go down to 2% in 1 year. If treasurers expectations turn out to be correct the company will be forced to lend at a lower rate unless some sort of hedge is created to protect the rate of return on the loan. In this situation the XYZs spot market risk exposure is _______ and the treasurer should pay _______ and receive ________ under the FRA agreement in order to hedge its spot market risk exposure.

1. Short; Pay LIBOR; Receive Fixed
2. Short; Pay Fixed; Receive LIBOR
3. Long; Pay LIBOR; Receive Fixed
4. Long; Pay Fixed; Receive LIBOR
5. Neutral; Pay Fixed; Receive LIBOR