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# A technology corporation wants to offer a $40 million to one of its major clients. The 6-months LIBOR will be less than 3.5% while the 6-month LIBOR...

A technology corporation wants to offer a $40 million to one of its major clients. The 6-months LIBOR will be less than 3.5% while the 6-month LIBOR is 6.5%. The bank intends to use this deposit to buy a 3.0% The agreement rate with the seller is 5.5%. There are 94 days in the first three months and 92 days in the remaining three months period.

a. What is the banks interest expense on the 6-month Eurodollar deposit.

b. What is the banks interest income on the first three month commercial paper loan.

c. What is the value of the FRA from the last three months of the investment period if 3-months LIBOR (SR) for that period is 5.5%.