The CEO is afraid interest rates will increase by 0.5% in the U.K. The U.K. subsidiary has a current short term loan of 1,000,000 that expires 90 days from now, but will have to borrow the same amount again after expiry for operational expenses that will be incurred. Calculate the expected outcome of a 90 day forward rate agreement entered into in the United Kingdom to hedge against the increase in interest rates on 1,000,000. The current risk free United Kingdom rate is to be used as the agreed rate for the calculation. Also assume the settlement rate is the current risk free rate plus 0.5%. Advise the CEO whether HighTech should take a long or short position to hedge the risk of the increasing interest rates.Information from the following table can be used for your calculations:

Annual risk free interest rates:

USA

0.140%

Japan

0.025%

South Korea

0.664%

Canada

0.166%

UK

0.077%

Australia

0.112%

South Africa

4.545%

X X A A- A the increase in interest rates on E1,000,000. The current risk free United Kingdom rate is to be u as the agreed rate for the calculation. Also assume the settlement rate is the current risk free plus 0.5%. Advise the CEO whether HighTech should take a long or short position to hedge the ris the increasing interest rates. Information from the following table can be used for your calculation Annual risk free interest rates: USA 0.140% Japan 0.025% South Korea 0.664% Canada 0.166% UK 0.077% Australia 0.112% South Africa 4.545% 3. The profit generated by the subsidiary in the U.K. is considered as a good source of money to used to pay for the import of manufacturing equipment from Japan for the electronic compone plant in the U.S.A. The CEO has already entered into negotiations with the Japan supplier of the rs to pay for the equipment that will bThe CEO is afraid interest rates will increase by 0.5% in the United Kingdom. The U.K. subsidiary has a current short term loan of f1,000,000 that expires 90 days from now, but it will have to borrow the same amount again after expiry for operational expenses that will be incurred. Calculate the expected outcome of a 90 day forward rate agreement entered into in the United Kingdom to hedge against the increase in interest rates on f1,000,000. The current risk free United Kingdom rate is to be used as the agreed rate for the calculation. Also assume the settlement rate is the current risk free rate plus 0.5%. Advise the CEO whether HighTech should take a long or short position to hedge the risk of the increasing interest rates, Show your calculation by applying the correct formula in the space provided below: 6 marks' 17: 17 51:1 78: 10/1305 505 8 1074