you borrow euro 5 million at 7 00 for 6 months 183 days and deposit euro 5 million f 600393

You borrow €5 million at 7.00% for 6 months (183 days) and deposit €5 million for 3 months (91 days) at 6.75%. You wish to hedge the mismatched position, based on the following FRA prices quoted to you:

3 v 6: 7.10%/7.15%

6 v 9: 7.20%/7.25%

1. Do you buy or sell the FRA?
2. At what price?
3. For a complete hedge, what amount do you deal?

When it comes to fixing the FRA, the 3-month rate is 6.85%/6.90%:

1. What is the settlement amount? Who pays whom?

What is the overall profit or loss of the book at the end of six months, assuming that your borrowings are always at LIBOR and your deposits at LIBID?