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In six months, a company needs to borrow $48 million for one year and it is concerned about interest rates increasing. The company decides to
In six months, a company needs to borrow $48 million for one year and it is concerned about interest rates increasing. The company decides to hedge its interest rate risk by going long on a forward rate agreement on twelve-month LIBOR at 7.5% per year. If twelve-month LIBOR is 6.75% per year when the forward rate agreement expires, what payment will the company make or receive? 1) Pay $329,557 2) Receive $329,557 3) Pay $331,767 4) Receive $324,467 5) Pay $337,237
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