Tutorial Week $4$ S$2$Q $1($a$)$Assume it is now the $1$st December, and Leo plc expects to receive $12\mathrm{.}5$ million in six months and can deposit this at a rate of LIBOR $+0\mathrm{.}75\%$ for a period of $3$ months. LIBOR is currently $4\mathrm{.}25\%,$ and the treasurer wants to hedge the risk of falling interest rates by using futures or forward rate agreements.June $500,000$ three$-$month sterling futures are available at $96\mathrm{.}60$ with a tick value of $12\mathrm{.}50$ and a FRA is available at $3\mathrm{.}803\mathrm{.}75.$Required:If LIBOR fell by $0\mathrm{.}5\%$ over the next six months, show the expected outcomes of the cash market, the futures market and the FRA market.Q $1($b$)$If LIBOR rose by $0\mathrm{.}7\%$ over the next five months, show the expected outcomes of the cash market, the futures market and the FRA marketQ $1($c$)$You currently hold $100,000$ shares in Macko plc which are currently trading at $15\mathrm{.}00.$ Due to the covid$-19$ virus, you are concerned that there will be a significant fall in the markets, and you wish to protect yourself against such an eventuality.Required:Use the information below to explain how you could use the traded options market to hedge your position and show the outcome if the share price fell, and if the share price increased.Current time: $30$th January.Traded option quotes on Company A on $30$th JanuaryOption $145015001650$CallsMarch June Sept$\mathrm{.}63899829496992132$PutsMarch June Sept. $121826294356698392$