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PROBLEM 3 In 270 days, a US-based company expects to borrow $ 15,000,000 for a period of 90 days at 90-day Libor set in 270
PROBLEM 3
In 270 days, a US-based company expects to borrow $ 15,000,000 for a period of 90 days at 90-day Libor set in 270 days. The company is concerned that rates may increase.
At time 0, this company enters a 9 12 FRA, an instrument that expires in 270 days and is based on 90-day Libor. The company will receive floating (long position).
At time 0:
90 -day Libor in USD (Lh) is 1.7%.
270 -day Libor in USD (Lh) is 2.1%.
360 -day Libor in USD (Lh) is 2.5%.
After 90 days:
90-day Libor in USD (Lh) is 1.62%.
180-day Libor in USD (Lh) is 1.9%.
270 -day Libor in USD (Lh) is 2.05%.
360 -day Libor in USD (Lh) is 2.5%.
After 270 days:
90-day Libor in USD (Lh) is 1.75%.
270 -day Libor in USD (Lh) is 2.2%.
360 -day Libor in USD (Lh) is 2.6%.
What is a price of this FRA at time 0?
What will be the payment paid or received to settle this contract? Further, please specify what party will make a payment and when?
What will be a value of an existing 912 FRA to the short and to the long parties 90 days from initiation of that contract?
In 270 days, a US-based company expects to borrow $ 15,000,000 for a period of 90 days at 90-day Libor set in 270 days. The company is concerned that rates may increase.
At time 0, this company enters a 9 12 FRA, an instrument that expires in 270 days and is based on 90-day Libor. The company will receive floating (long position).
At time 0:
90 -day Libor in USD (Lh) is 1.7%.
270 -day Libor in USD (Lh) is 2.1%.
360 -day Libor in USD (Lh) is 2.5%.
After 90 days:
90-day Libor in USD (Lh) is 1.62%.
180-day Libor in USD (Lh) is 1.9%.
270 -day Libor in USD (Lh) is 2.05%.
360 -day Libor in USD (Lh) is 2.5%.
After 270 days:
90-day Libor in USD (Lh) is 1.75%.
270 -day Libor in USD (Lh) is 2.2%.
360 -day Libor in USD (Lh) is 2.6%.
What is a price of this FRA at time 0?
What will be the payment paid or received to settle this contract? Further, please specify what party will make a payment and when?
What will be a value of an existing 912 FRA to the short and to the long parties 90 days from initiation of that contract?
thats all is provided
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Investing In Fixed Income Securities Understanding The Bond Market
Authors: Gary Strumeyer
1st Edition
0471465127, 9780471465126
