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A corporation knows that it will need to borrow 10,000,000 $ insix months' time for a 12-month period. The interest rate at whichit can borrow today is 12-month LIBOR plus 25bp. The 12-month LIBORcurrently is at 0.90%, but the company wants to cover against thepossible rise of the LIBOR in the next 6 months.The company decides to buy a 6x18 FRA in order to cover the periodof 12 months starting 6 months from now. They receive a quote of1.25% from the bank, and they decide to buy the FRA for a notionalof 10,000,000$.On the settlement date (six months from today), the 12-month LIBORfixes at 1.10% (so, the interest to be applied to the loan is 1.10%plus 25bp), which is the settlement rate applicable for thecompany's FRA.As anticipated by the treasurer, the 12-month LIBOR rose duringthe 6-month waiting period, hence the company will receive thesettlement amount from the FRA seller.Find the settlement amount.Based on the above case, what will be the cost (the interestspaid by that corporation) of that loan?And how much will have that Companypaid in total (because of the loan plus/minus the cost/gain of theFRA)?Based on the previous exercise 3, what if on the settlementdate (six months from today), the 12-month LIBOR fixes at 0.75%?what is the value of the settlement amount the company will receivefrom the FRA seller, if any?