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The forward rate agreement (FRA) serves as a hedge for both the seller and buyer. From the seller's perspective, they aim to lock in a fixed lending rate. The buyer, on the other hand, seeks to secure a fixed borrowing rate. Assuming a notional amount of $100 million, which is not a loan but a reference for calculating payoffs, the seller wants to establish a fixed rate of 4% per annum. This rate is set for a forward loan that will commence in three years. The FRA thus allows the seller to guarantee their lending rate while providing a fixed rate for the buyer's borrowing needs.