Educorporation is seeking a RM 15 million loan to be drawn in 3 months. Its banker, Maybank has agreed to provide the loan at KLIBOR + 2%. The 3-month KLIBOR is being quoted at 5% while the, 3-month KLIBOR futures is 94.00.

a.  What target rate can Educorporation 'lock-in' using interest rates futures?

b.  Outline the hedge strategy using KLIBOR futures.

c.  Prove that the target rate has indeed been locked-in, even if rates rise 2% over the, next 3 months.

d.  Show how Educorporation could use an FRA to achieve the same goal of locking in a target interest rate? (Assume a counterparty and be specific about the terms).

e.  Show how Educorporation could have used an interest rate swap to lock-in the target rate (use a diagram, include / show the payments to Maybank).