A company is going to borrow 6m in three months time for a period of six months.
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A company is going to borrow £6m in three months’ time for a period of six months. It is afraid that interest rates will rise between now and the time that the loan is taken out. It intends to hedge the risk using futures contracts. Given that the contract size of three-month interest futures is £500,000, what kind of futures hedge should it create?
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If we sell futures contracts and interest rates increase we close out our position in ...View the full answer
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Related Book For
Corporate Finance Principles And Practice
ISBN: 9781292450940
9th Edition
Authors: Denzil Watson, Antony Head
Question Posted:
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