In late April, a corporate treasurer for a large blue-chip company projects the need for a $2

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In late April, a corporate treasurer for a large blue-chip company projects the need for a $2 million bank loan starting on 1 June, for a period of 90 days. The bank quotes a fixed rate of 6.4% on a 1 x 4 FRA. The corporate treasurer buys the 1 x 4 FRA on a face value of $2 million. On 1 June the bank bill swap rate (BBSW) is 6.1%, so she issues bank bills into the market at that rate and then organises settlement with the bank on the FRA.

a)Calculate the proceeds from the bank bills(1.5 marks)

b)Calculate the settlement amount(0.5 marks)

c)Explain the settlement process, i.e., explain which party makes the settlement payment(1 mark)

Posted Date: May 19, 2024 10:06 AM

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In late April, a corporate treasurer for a large blue-chip company projects the need for a $2

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