Question: Justbrowsing Corp. will need to take out a 120-day, $ 200,000 loan 60 days from now. To protect against interest rate ____________ (increases/decreases), the corporation

Justbrowsing Corp. will need to take out a 120-day, $ 200,000 loan 60 days from now. To protect against interest rate ____________ (increases/decreases), the corporation should buy an interest rate ___________ (call/put) option with the premium payed on day t= ____________ .

The option has X=8.26% and expires in 60 days.

The corporation will make a decision on day t= _________ about whether or not to exercise the option. On this day the applicable (spot) interest rate is 9.15%. The corporation __________ (should/should not) exercise the option. The payoff will be $ _____________(rounded to two decimals) on day t= ___________.

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