QUESTIONS 91 THROUGH 96 RELATE TO DERIVATIVE INVESTMENTS.

96. A dealer quotes a forward rate agreement (FRA) expiring in 30 days, for which the

underlying is 90-day LIBOR, at 4.5%. An investor shorts the contract and the dealer

goes long for a notional principal of $15 million. At the expiration of the FRA the rate

on 90-day LIBOR is 4.0%. The investor is most likely to:

A. pay the dealer $6,229.

B. pay the dealer $18,564.

C. receive from the dealer $18,564.

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