Question
A bank needs to borrow $10 million in three months for a nine - month period. It buys a three against twelve FRA for $10
A bank needs to borrow $10 million in three months for a nine - month period. It buys a three against twelve FRA for
$10 million at a rate of 8% to hedge its exposure . In three months the FRA settles at 7.5%. There are 273 days in the FRA
period.. What is the banks net borrowing cost for the 273 days (at an annualized rate)?
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The Global Financial Crisis And The New Monetary Consensus
Authors: Marc Pilkington
1st Edition
0415524059, 978-0415524056
