Kayla Co. Ltd cash flow forecast shows that it will have to borrow $2m from Nana's...
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Kayla Co. Ltd cash flow forecast shows that it will have to borrow $2m from Nana's Bank in four months' time for a period of three months. The company fears that by the time the loan is taken out, interest rates will have risen. The current interest rate is 5% and this is offered by Oheneba Bank on the required FRA. Required 6) What kind of FRA is needed? (i) What are the cash flows if the interest rate has risen to 7% when the loan is taken out? (i) What are the cash flows if the interest rate has fallen to 4.6% when the loan is taken out? Kayla Co. Ltd cash flow forecast shows that it will have to borrow $2m from Nana's Bank in four months' time for a period of three months. The company fears that by the time the loan is taken out, interest rates will have risen. The current interest rate is 5% and this is offered by Oheneba Bank on the required FRA. Required 6) What kind of FRA is needed? (i) What are the cash flows if the interest rate has risen to 7% when the loan is taken out? (i) What are the cash flows if the interest rate has fallen to 4.6% when the loan is taken out?
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a i 4 x 7 FRA is required to hedge or speculate interest rates Cash is requir... View the full answer
Related Book For
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts
Posted Date:
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