Forward Rate Agreement Question agreement, situation, discount, forward

kseniaru

From Schweser QBank:
Consider a $1 million 90day forward rate agreement based on 60day London Interbank Offered Rate (LIBOR) with a contract rate of 5%. If, at contract expiration, 60day LIBOR is 6%, the short must pay:
A) $1,650.17.
B) $1,652.89.
C) $1,572.33.
D) $1,666.67.
–
Answer:
[(0.06  0.05) (60 / 360) (1,000,000)] / [1 + 0.06(60 / 360)] = 1,650.17.

Why do we discount the $1,666.67 by the denominator? I thought the short would pay $1,666.67?

evolsteevol

With 100% certainty.