(iii) Kza.com recently sold a 2-v-5 3,000,000 Floating Rate Agreement (FRA) when rates were quoted to the firm as 6.20/6.30 per cent. Settlement is now due while the 3-month (91-days) GBP LIBOR is 6.15 per cent. Calculate the amount that Kza.come can be expected to pay or receive [10 marks] (iv) 3121 Investment management has a deposit of 8,000,000 at 58 per cent for nine months (273 days). Simultaneously 3121 Investment management also lend 8,000,000 at 5.8 per cent for 3 months (92 days). On account of the mismatch, 3121 Investment management also decides to cover the disparity with a 3-v-9 FRA, which is quoted to the firm as 5.70/5.75. (a) Would it be in the interest of 3121 Investment Management to buy or sell the FRA and at what price should it deal? [5 marks] (b) What notional principal amount can 3121 Investment Management be expected to deal for the FRA, on the assumption that the firm seeks to match its exposure as closely as possible and it can in exactly the correct amount? [10 marks) (c) On the settlement day of the FRA, the 6-month interest rate us 5.85/6.05 per cent Calculate the settlement on the FRA, and comment on who pays whom. [10 marks) (d) Consistently, 3121 Investment Management borrows at LIBOR and lend at the London Interbank bid-rate (LIBID). At the end of 9-months, what is 3121 Investment Management's overall cash or profit or loss in Euros? [15 marks] (iii) Kza.com recently sold a 2-v-5 3,000,000 Floating Rate Agreement (FRA) when rates were quoted to the firm as 6.20/6.30 per cent. Settlement is now due while the 3-month (91-days) GBP LIBOR is 6.15 per cent. Calculate the amount that Kza.come can be expected to pay or receive [10 marks] (iv) 3121 Investment management has a deposit of 8,000,000 at 58 per cent for nine months (273 days). Simultaneously 3121 Investment management also lend 8,000,000 at 5.8 per cent for 3 months (92 days). On account of the mismatch, 3121 Investment management also decides to cover the disparity with a 3-v-9 FRA, which is quoted to the firm as 5.70/5.75. (a) Would it be in the interest of 3121 Investment Management to buy or sell the FRA and at what price should it deal? [5 marks] (b) What notional principal amount can 3121 Investment Management be expected to deal for the FRA, on the assumption that the firm seeks to match its exposure as closely as possible and it can in exactly the correct amount? [10 marks) (c) On the settlement day of the FRA, the 6-month interest rate us 5.85/6.05 per cent Calculate the settlement on the FRA, and comment on who pays whom. [10 marks) (d) Consistently, 3121 Investment Management borrows at LIBOR and lend at the London Interbank bid-rate (LIBID). At the end of 9-months, what is 3121 Investment Management's overall cash or profit or loss in Euros? [15 marks]
