Suppose your company will receive $100 million at t = 4 but must make a $107 million

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Suppose your company will receive $100 million at t = 4 but must make a $107 million payment at t = 5. Assume the spot and forward rates from question 5. Show how the company can lock in the interest rate at which it will invest at t = 4. Will the $100 million, invested at this locked-in rate, be sufficient to cover the $107 million liability?

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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