AlphaBeta Ltd needs to borrow $10 million for a 3-month period in 3 months' time. In order to hedge the exposure to interest rates rising AlphaBeta buys a 3X6 FRA based on LIBOR with a 90/360-day count convention. All interest rates are compounded quarterly. It enters the FRA at a FRA rate of 4% per annum. AlphaBeta can borrow at LIBOR + 0.2%. In three months' time at settlement of the FRA LIBOR is 4.6%. 

 What is The cash-flow on the FRA?

When Alpha beta borrows for the three month period the effective cost of borrowing is ____% per annum?

Answer rating: 100% (QA)

To calculate the cash flow on the FRA we need to determine the difference between the FRA rate and t... View the full answer