A financial manager needs to hedge against a possible decrease in short term interest rate. He decides

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A financial manager needs to hedge against a possible decrease in short term interest rate. He decides to

hedge his risk exposure by going short on an FRA that expires in 90 days and is based on a 180-day

LIBOR.

The current term structure for LIBOR is as follows:

Term Interest Rate

90 day 5.85%

180 day 6.24%

270 day 6.57%

360 day 6.89%

Calculate the rate the manager would receive on this FRA.

Related Book For answer-question

Financial Markets and Institutions

ISBN: 978-0077861667

6th edition

Authors: Anthony Saunders, Marcia Cornett

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Posted Date: Dec 05, 2022 02:00 AM

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A financial manager needs to hedge against a possible decrease in short term interest rate. He decides

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Financial Markets and Institutions

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