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An investor has entered into a forward rate agreement (FRA) where she has contracted to pay a fixed rate of 5 percent on $5,000,000 based on the quarterly rate in three months. If interest rates are compounded quarterly, and the floating rate is 2 percent in three months, what is the payoff at the end of the sixth month? The investor will: A. receive a payment of $37,500. B. make a payment of $37,500. C. make a payment of $75,000. D. receive a payment of $75,000. |