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5. Suppose you expect to borrow $50 million on March 18, 2016 at LIBOR + 120bp. You will have to pay back the loan in
5. Suppose you expect to borrow $50 million on March 18, 2016 at LIBOR + 120bp. You will have to pay back the loan in three months. Today is December 1st. Given the futures prices below, how would you go about hedging your exchange rate risk and what would your net cost of borrowing be in annual percentage terms if LIBOR on March 18, 2016 is 6%? Maturity Price Jan 16 95.4550 Mar 16 95.8100 Jun 16 96.2550
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