Please solve :

Questions $3$

Background: GlobalPetrol Corp, which faces significant financial challenges due to geopolitical

tensions stemming from Russia's invasion of Ukraine, has resulted in considerable volatility in the

global oil markets, affecting oil producers worldwide who are exposed to fluctuating prices. The

corporation is now managing a new $$15$ million investment portfolio globally, spanning from July $1$ st

to October $1$st$,$ a total of $92$ days. The investment aims to optimize returns amid fluctuating interest

rates. The department has fixed annual investment rates of $5\mathrm{.}10\%$ for $3$ months, $5\mathrm{.}6\%$ for $4$ months,

and $6\mathrm{.}7\%$ for $5$ months. Historical data suggests volatility in floating rates. For FRA pricing, the

actual$/360$ convention is used, and as of July $1$ st$,$ the Libor rate is forecasted to be $5\mathrm{.}30\%$ per annum.

The primary objective for GlobalPetrol Corp is to navigate the fluctuations in interest rates while

ensuring the highest possible net interest revenue over the investment period. This requires a precise

calculation of potential returns from fixed$-$rate investments and comparing them against returns

hedged with interest rate derivatives such as FRA contracts, Eurodollar Futures, and Bank Accepted

Bills Futures.

Conclusion: This comprehensive approach will help GlobalPetrol Corp effectively manage its financial

exposure during an uncertain economic period, aligning investment decisions with overall corporate

finance strategy amidst global market fluctuations.

You are tasked with calculating and determining the most profitable net interest revenue for the

investment by using the following interest rate hedge instruments:

a$)$ FRA

$(5$ marks$)$

b$)$ Eurodollar Futures contracts

$(5$ marks$)$

c$)$ Bank Accepted Bills Futures contracts.

$(5$ marks$)$