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Hanig Bottle Company wants to borrow $20M three months from today for a 9 month period. Hanig wants to protect against interest rate risk by
Hanig Bottle Company wants to borrow $20M three months from today for a 9 month period. Hanig wants to protect against interest rate risk by entering into a 3x9 forward rate agreement (FRA) at 3.25%. In 3 months, the interest rates are 2.5%.
Hanig receives $112,500 from the FRA. | ||
Hanig allows the FRA to expire unused. | ||
Hanig receives $150,000 from the FRA | ||
Hanig pays $112,500 on the FRA. |
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