Question: . A bank has borrowing needs at time T > 0. Show that by combining an FRA trade today with a LIBOR loan at time

. A bank has borrowing needs at time T > 0. Show that by combining an FRA trade today with a LIBOR loan at time T, the bank can today lock in its interest cost for the period T to T + . Does the borrowing bank need to buy or sell the FRA to do this? What is the fixed rate that the bank locks in?

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