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Show all your work. Round to 6 decimal places in the intermediate steps and round the final result to 4 decimals. You may type your answers in a Word document or scan your handwritings into a PDF file. ABC Bank has committed to lend to a firm $30 million in 90 days. The loan will mature 60 days after its initiation. The bank is concerned about the volatile interest rates and decides to use an FRA to hedge its position. The term structure of LIBOR is as follows: Term (days) Rate(%) 30 2.4809 60 2.5606 90 2.6066 120 2.6711 150 2.6798 180 2.6848 270 2.7012 360 2.8836 1. Explain the risk(s) that the bank is exposed to. 2. Should the bank be the long or the short? Explain. 3. What is the underlying asset? 4. Price the FRA. 5. Suppose 30 days after the FRA was initiated the ABC Bank wants to assess its FRA position. The term structure of LIBOR has changed to: Term (days) Rate (%) 30 2.3809 60 2.4606 90 2.5066 120 2.5711 150 2.5798 180 2.5848 270 2.6012 360 2.7836 What is the value of the FRA to the bank? Show all your work. Round to 6 decimal places in the intermediate steps and round the final result to 4 decimals. You may type your answers in a Word document or scan your handwritings into a PDF file. ABC Bank has committed to lend to a firm $30 million in 90 days. The loan will mature 60 days after its initiation. The bank is concerned about the volatile interest rates and decides to use an FRA to hedge its position. The term structure of LIBOR is as follows: Term (days) Rate(%) 30 2.4809 60 2.5606 90 2.6066 120 2.6711 150 2.6798 180 2.6848 270 2.7012 360 2.8836 1. Explain the risk(s) that the bank is exposed to. 2. Should the bank be the long or the short? Explain. 3. What is the underlying asset? 4. Price the FRA. 5. Suppose 30 days after the FRA was initiated the ABC Bank wants to assess its FRA position. The term structure of LIBOR has changed to: Term (days) Rate (%) 30 2.3809 60 2.4606 90 2.5066 120 2.5711 150 2.5798 180 2.5848 270 2.6012 360 2.7836 What is the value of the FRA to the bank