Question: final help A company knows it will need to borrow 1 million in three months for a 12-month period. It can borrow funds today at

final help A company knows it will need to borrow 1

final help

A company knows it will need to borrow 1 million in three months for a 12-month period. It can borrow funds today at LIBOR+ 50 basis points. You decide to buy a suitable Forward Rate Agreement (FRA) to cover the position at a contract price of 5%1/2. Interest rates at expiry of the contract are given below: i. What suitable FRA and position does the company need to enter into ii. Calculate the settlement price when the FRA expires [1 Mark] [3 Marks]

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