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Use the risk-free rates below to value an FRA where you will pay 5% (compounded annually) and receive LIBOR for the third year on $1
Use the risk-free rates below to value an FRA where you will pay 5% (compounded annually) and receive LIBOR for the third year on $1 million. The forward LIBOR rate (annually compounded) for the third year is 5.5%. Record as a dollar amount rounded to two decimal places.
Year 2: 4.0%
Year 3: 5.1%
Year 4: 5.7%
Year 5: 5.7%
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