Question: Assuming that risk-free rates are as in Problem 4.5, what is the value of an FRA where the holder will pay LIBOR and receive 4.5%

Assuming that risk-free rates are as in Problem 4.5, what is the value of an FRA where the holder will pay LIBOR and receive 4.5% (quarterly compounded) for a three-month period starting in one year on a principal of $1,000,000. The forward LIBOR rate for the three month period is 5% quarterly compounded.

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