57 58 59 60 3 61 nts Your bank has a large portfolio of long term...

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57 58 59 60 3 61 nts Your bank has a large portfolio of long term fixed rate mortgages and you believe that interest rates will change by year end. You are worried that because of the interest rate change many of the mortgages will be prepaid by the homeowners. How could you use futures to reduce your bank's interest rate risk? Explain and be specific. 62 63 64 65 66 67 68 69 70 71 72 1 73 nts A U.S. firm borrowed euros at a variable rate several years ago, but now euro interest rates are rising along with the $/euro exchange rate. To limit their risk, the firm could use a currency swap with a set exchange rate where the U.S. firm will pay what and receive what? Be specific and indicate currency of payment and receipt and whether each side of the swap is at a fixed or variable interest rate. 74 75 76 77 78 79 80 81 82 83 84 57 58 59 60 3 61 nts Your bank has a large portfolio of long term fixed rate mortgages and you believe that interest rates will change by year end. You are worried that because of the interest rate change many of the mortgages will be prepaid by the homeowners. How could you use futures to reduce your bank's interest rate risk? Explain and be specific. 62 63 64 65 66 67 68 69 70 71 72 1 73 nts A U.S. firm borrowed euros at a variable rate several years ago, but now euro interest rates are rising along with the $/euro exchange rate. To limit their risk, the firm could use a currency swap with a set exchange rate where the U.S. firm will pay what and receive what? Be specific and indicate currency of payment and receipt and whether each side of the swap is at a fixed or variable interest rate. 74 75 76 77 78 79 80 81 82 83 84