A financial manager needs to hedge against a possible decrease in interest rates. He decides to hedge his risk exposure by going short on a 3x12 FRA at a rate of 6.50%. The current term structure for LIBOR is as follows:

Term Interest rate 30 days 5.83% 90 days 6.00% 180 days 6.14% 360 days 6.45%

It is now 60 days since the manager took a short position in the FRA. Interest rates have shifted down, and the new term structure for LIBOR is as follows:

Term Interest rate 30 days 5.50% 300 days 5.62%

The market value of this FRA based on a notional principal of $15,000,000 is:

a.

$93,900 (gain to short)

b.

-$93,900 (loss to short)

c.

-$95,900 (gain to short)