11. A firm needs to invest $2,000,000 three months from today for three months. Which of the following is a correct strategy to hedge its interest rate exposure?

a. Buy an FRA that is comparable in maturity with the planned investment. b. Sell an FRA that is comparable in maturity with the planned investment. c. Buy Eurodollar futures contracts that are comparable in maturity with the planned investment. d. Enter a swap that the firm pays floating and receive fixed.

12. A firm buys three against six FRA at 7.5% (annualized) with the notional principal of $2 million. On the settlement date, the interest rate in the market is 9%. How much is the firm cash settlement for the FRA? (Assume dtm is 91 days.)