Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A business intends touse 90-day bank-accepted bills futures to hedge the interest rate riskresulting from itsplans to borrow approximately $50million using the issue of commercial
A business intends touse 90-day bank-accepted bills futures to hedge the interest rate riskresulting from itsplans to borrow approximately $50million using the issue of commercial paperin three months. The yield oncommercial paperis currently 6.61% p.a. and the90-day bank-accepted bill futures are currently priced at 95.85.
The effective cost of funds if, in three months time the yield on commercialpaper is 7.5%p.a. and the 90-day bank-accepted bills futures contract is priced at 94.72, is ______ % p.a. (rounded to two decimal places)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started