1. A bank observes the following term structure of LIBOR:
Term (days) Rate
90 5.00%
180 5.15%
270 5.25%
360 5.30%
a. Find the rate on a new 6 X 9 FRA.
b. Suppose a $30 million FRA was established at 5.2 percent and expires in 180 days. The underlying is the 180-day LIBOR. Find the value of the FRA for the party paying fixed and receiving floating.
