A forward rate agreement (FRA) that expires in 180 days and is based on 90-day LIBOR is quoted at 2.2%. At expiration of the FRA,90-day LIBOR is 2.8%. For a notional principal of USDI,000,000, the payoff of this FRA is closest to:
B is correct.1,000,000 × (0.028 -0.022) × (1/4)/(1 + (0.028/4)) = 1,489.57.