Nestle rolls over a $25M loan priced at LIBOR3 on a 3 month basis. The company feels

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Nestle rolls over a $25M loan priced at LIBOR3 on a 3 month basis. The company feels that interest rates are rising and that rates will be higher at the next roll-over in three months. Suppose the current LIBOR3 is 4.4375% and Nestle buys a "3 x 3" FRA on LIBOR at 5% from Credit Suisse.

A.) In three months, interest rates have risen to 5.25%. How much will Nestle receive/pay on its FRA?

B.) After three months, interest rates have fallen to 4.25%. How much will Nestle receive/pay on its FRA?

Related Book For answer-question

Financial Institutions Management A Risk Management Approach

ISBN: 978-1259717772

9th edition

Authors: Anthony Saunders, Marcia Millon Cornett

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Posted Date: Mar 31, 2020 11:45 PM

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Nestle rolls over a $25M loan priced at LIBOR3 on a 3 month basis. The company feels

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a Nestle will receive an amount of interest it will be a recipient ... View the full answer

Financial Institutions Management A Risk Management Approach

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