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The forward rate agreement (FRA) serves as a hedge for the seller, who aims to secure a fixed lending rate, and the buyer, who seeks to lock in a fixed borrowing rate. Focusing on the seller's perspective, in this scenario, the notional amount of the contract is $100 million, which acts merely as a reference for the payoff without involving actual principal investment. The FRA stipulates a fixed interest rate of 4% per annum, which the seller intends to secure as their lending rate. This agreement functions as a forward loan, with the fixed rate expected to commence in three years.