A Forward Rate Agreement contains an agreed interest rate of 4.5% on a 6-month loan. If settled at the time of borrowing, what amount would the borrower pay or receive on a $100,000 loan if the prevailing 6-month interest rate is 5.5%?

Question options:

	$947.87 payment
	$956.94 payment
	$956.94 receipt
	$947.87 receipt

Two months from today you plan to borrow $8 million for 6 months at LIBOR. You hedge your interest rate risk with a euro dollar futures contract priced at 92. If settled in arrears, what is your payment if the 6-month LIBOR is 3.75% in two months?

Question 3

Question options:

	$18,500
	$10,000
	$12,500
	$21,700

Which of the following is NOT true?

Question 4

Question options:

	The buyer of the eurodollar futures contract gets paid when the interest rate rises.
	To hedge against the rise in the interest rate, the borrower shorts eurodollar futures contracts.
	Eurodollar futures are a way for companies and banks to lock in an interest rate today for money that they intend to borrow or lend in the future.
	To hedge against the fall in the interest rate, the lender longs eurodollar futures contracts.