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a) Explain the income of an FRA dealer and how they manage their exposure to interest rate risk and default risk. (2 marks) b) Demonstrate

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a) Explain the income of an FRA dealer and how they manage their exposure to interest rate risk and default risk. (2 marks) b) Demonstrate how a 1:4 FRA at 4.5% locks-in the effective interest cost on a planned issue next month of $100 million (face value) 90 -day bills if the spot rate then is 5.00%. (4 marks)

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