Suppose it is currently December and you anticipate a three-month borrowing need for $15,000,000 beginning in June.
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Suppose it is currently December and you anticipate a three-month borrowing need for $15,000,000 beginning in June. Suppose also that you can borrow at Libor, and wish to hedge the risk of interest-rate changes between now and June using euro-dollar futures. Suppose that the euro-dollar price of the June contract is currently $95. Assuming that the 3-month borrowing horizon has 90 days, what is the net cash outflow if the cost of borrowing is 5.85%?
Related Book For
Fundamentals of Investments
ISBN: 978-0132926171
3rd edition
Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey
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