Problem
Company B has entered into a forward rate agreement (F RA) where it will receive 4% with quarterly compounding (for 3-month period) and pay the 3-month LIBOR rate observed in 2 years. The interest payment is exchanged in 2.25 years. The notional is $1M. The current forward rate for t=2 to t=2.25 years is 4.5%, and the zero spot rate for 2.25 years is 4.4%. What is the value of this FRA?